THE OIL WAR' AND 'THE ARABS' GRAND SLAM,

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01194A000100460001-5
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 21
• Document Creation Date: November 11, 2016
• Document Release Date: August 6, 1998
• Sequence Number: 1
• Publication Date: December 6, 1974
• Content Type: REPORT

25X1C10b
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CPYRGHT
UNTIL the late sixties, the big oil
-companies were more worried by
the prospect of too much oil, which
-could bring prices and profits
.tumbling down further, than by the
'prospect of a shortage. In May'
1967 Michael Haider, then chair.
'man of the biggest company,
Exxon (or Esso), answered a share-
holder's question at the annual
meeting.in Houston with the words:
`I wish I could say I will be around
,when there is a shortage of crude
Foil outside the United States.'
A year later, some oil companies
were still concerned at the thought
of a glut, and one of the `Seven
Sisters,' the. Standard Oil Com-
pan'y of California (Socal or
Chevron), was specially apprehen-
sive 'of the Alaska discoveries, in
which they had no share, which
would bring a flood of oil down to
the West Coast,;, A Socal company
memo in December 1968 warned
:thap`:within five to 10 years there
,nay be large new crude supplies
from the Arctic regions of the
:.world seeking markets and thereby
extending and magnifying the sur-
plus supply problems.'
In 1969 George Piercy, the Exxon
;director concerned with the Middle
East, had been fairly confident of
future supplies meeting demands.
.,On the one side he had expected
shat the boom in Japan-the big-
gest single importer of oil-would
begin to slow down. On the other
hand, there were some huge new
expected sources of oil, including
Alaska, Libya and, in the longer
term, the North Sea, whose esti-
mated reserves were constantly
increasing.
But _ already by the late sixties
there was an ominous turn-down in
Exxon's master-graph, w h i c h
-showed spare capacity compared
"to world demand for oil, and by
1970 the trend had become much
more serious. The Alaskan pro-
duction had been delayed by the
protests of the environmentalists.
The Libyan production, after the
revolution and the militant regime
of Qadhafi, had become much less
ieliable. In 1972. there came a
=spore :serious shock: Kuwait de-
cided that, to conserve their
resources, they wou c not a ow
production to 'go above three
million barrels a day.
For BP and Gulf, the two part-
ners in Kuwait, this was menacing
news. And Shell, too, was becom-
ing alarmed by impending short-
ages.:. In' October 1971, Sir David
Barran, then chairman of Shell
Transport and Trading, warned
'that the days of cheap oil were
over, and that by the end of the
century the oil consumers could be
`looking down the muzzle of a gun.'
But Exxon, like the other Ameri-
.can partners in Aramco, were not
seriously worried, for they were
one. of , the, four partners in
Aramco, the company which held
the vast concession in Saudi
Arabia ; and -they were confident
that Aramco could supply all the
extra required. Some of Exxon's
rivals, including BP-who had huge
investments in Alaska-suspected
that Exxon was not. at all sorry
that the Alaskan oil had been
delayed, and it was even suggested
that they might secretly have en-
couraged the . environmentalists'
protests: for Exxon had a 30 per
cent share in. Aramco, and Saudi
Arabian oil was much cheaper and
easier to produce.
Aramco, morever, had made
plans to jack up production by as
much as 25 per cent each year, with
huge extra capital and equipment ;
and the plans had soon borne oil.
By early 1973, the Saudis were
producing 61 million barrels a day,
and the prospects were even more
dazzling: 10 million by 1974, 20
million by 1983. Iran, too, was
preparing for the additional pro-
duction which the Shah had always
demanded. As other parts of the
world became more uncertain,
these two nations became more
crucial; but most of all, Saudi
Arabia.
Yet the very fact that Saudi
Arabia was becoming far the big-
gest supplier of oil made King
Faisal more vulnerable in-the face
of his Arab colleagues, and the
danger of an embargo more likely.
A few American experts, but very
few, worried that- the Saudis would
not indefinitely stand apart from
the other countries of OPE : one
of them was Jim Akins, ` blr Oil'
in the State Department, who wrote
an article called ` The Wolf is
Here' in May 1973 in Foreign
Affairs, warning that the Saudis
would stand by the other Arabs.
But Akins was discounted by his
superiors as a committed Arabist.
King Faisal was showing signs
of becoming much more worried by
the continued American support
for Israel, and he was taking some
trouble to influence Washington,
both through the oil_ companies
and through Akins, who provided
the chief link between the Arabs
and Washington. But Akins had
to go to odd lengths to convey the'
Saudis' views. In January 1973,
John Ehrlichman, President
Nixon's aide at the time, was. pre-
paring a visit to Saudi Arabia :
Akins asked Aramco to arrange
for Sheikh Yamani to `take Ehr-
lichman under his wing' and see to
it that Ehrlichman was given the
message 'We Saudis love you
people but your American policy
'is hurting us.'
Akins was accused of being anti-
Israeli, and of positively encourag-
ing the Arabs towards boycott
particularly by Professor Adelman,
the oil ' economist from MIT, the
scourge of the `Oil Cartel,' and
Akins's bitterest critic. For Adel.
man, writing in the autumn of 1972,
the talk of shortage merely re-
flected the interests of the big oil
companies, in. cahoots with the
Arabs : ` The oil companies are now
the agents of a foreign Power,' he
wrote. There was ` absolutely no
basis to fear an acute oil scarcity
over the next 15 years.'
Adelman, like many other oil
experts at the time, was confident
that an Arab embargo could not
be sustained, as the attempt in 1967
had indicated, and his view was
supported by a special task force
on oil imports, headed by George
Schultz (later Secretary of the
Treasury) which had reported in
1970. The report was sceptical
about an Arab shutdown and was
complacent that imports could
safely be increased.
But a few other experts were
convinced that American oil
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 CF (RGT
ster. r~ ` ?ro 4' ase
sultant in New York wl advises
both companies and Governments,
warned the annual meeting of the
American Petroleum Institute, in'
November 1972, that the US,
as a major world Power, could
not afford to be dependent for oil
on ` a handful of foreign countries.'
He proposed changes in the taxa-
tion system, including a possible
.extra tax on gasoline, and urged the
Western Governments to co-ordi-.
nate their policies.
But the American predicament
was very deep-rooted. As Howard
Page, Exxon's former Middle East
negotiator, put it : ` Our economic
policy was ensuring that we be-
came. increasingly dependent on
Middle East oil, while our foreign
policy was ensuring that the oil
would be cut off.' Those two oppo-
site American policies in the
Middle East had been divergent
ever since the setting up of the
State of Israel. They had been kept'
so remarkably separate for 25.
years : but they were now face to
face with each other.
On 3 May 1973, Frank Jungers,
-President of Aramco in Saudi
Arabia, paid a courtesy call on King
'Faisal, for half an hour. The' King
was cordial (Jungers reported
back to New York) but his. tone
-was quite different from that of
earlier meetings. The King
touched only briefly on his usual
hobbyhorse of the Zionist-Commu-
nist conspiracy. Only in Saudi
Arabia, the King stressed, were
American interests relatively safe;
but even in his kingdom it `would
be more and more difficult to hold
off the tide of opinion.'
The King was amazed that
Washington failed to perceive its
own interests. 'it was almost in-
conceivable in any democratic
State' (he told Jungers) `for a
Government to be so far away from
,the interests of its people.' But it
was easily put right, he went on:
`A simple disavowal of Israeli
policies and actions by the -US
Government would go a long
way.
Jungers then went on. to see
Kamal Adham, the King's
chamberlain and close adviser, who
gave a more ominous message. The
Saudis, he said, in spite of their
.problems with the Egyptians, could.
not stand alone when hostilities
broke out: they had expected that
after President Sadat had expelled
the Russians from Egypt, the
Americans would have persuaded
the Israelis to negotiate with the
Arabs. Adliam was sure that Sadat,
a courageous and far-sighted man,
would have to `embark on some
sort of hostilities' in order to
marshal American opinion to press
for a Middle East settlement.
-. It was a very specific and accur-
ate warning, and Jungers quickly
4 N P a 194AU-COI i 0000
fornia. Three weeks later the attentive, and Debono w
directly: the four Middle East King's mood : but he wa
-Hedlund of E7:xon, Moses of Finally, they went to ti
Mobil, Decrane of .lexaco, and
lMCQuinn of Socal-were at' the
Geneva International hotel for a
meeting with Sheikh Yantani; the -
Saudi Arabian oil Minister; to ..
negotiate about participation. -
Yamani' 'suggested that they
might pay a courtesy call on the
King, who had just been to Paris
and Cairo, where Sadat had given
oft was
s struck
in the
n't sure
it.
gon to see Bill Clements,. who was
then acting Secretary of Defence,
while James Schiesin
his own drilling company,
er was
lements
.lf, with
and was
widely regarded in Washington as.
-a key figure in the oil lobby. But
he made clear to his visitors that
he had his own information and
views about the Arabs : they would
him `a bad time' (as Yamani put
it), pressing him to step up his
political support. The King, after
a few pleasantries,. was much more
curt and abrupt than usual; he
warned the lour directors that time
was running out. He would not
allow his kingdom to become
isolated, because of America's
failure to support him, and he
used the phrase `you will lose
everything'-which to the visitors
could only mean that their oil
concession was at risk. The King
asked them to make sure. that the
American public were told where
their true interests lay; instead of
being 'misled by controlled news-
media.':
The Aramco men lost no time :
a week later they were all four of
them in Washington, to lobby top
Government officials: to each they
repeated the King's message, that
unless action was taken urgently,
everything would be lost. On 30
`Four huge oil
companies, with
billions of assets.
... had no influence
whatever'
May, they called first on the State
Department, to see a team led by
Joseph Sisco, in charge of Middle
Eastern affairs; but Sisco had
heard such warnings before, and,
he assured. them that his inforttta-.
tion was otherwise. The CIA had
reported through its own con-
tacts, including close relatives of
the King, that Faisal was only
bluffing : he had resisted pressure
from Nasser in the past, and could
resist pressure from Sadat now.
Then the four .went to the White
House, hoping to see Kissinger; but
they were fobbed off with General
Scowcroft and other advisers, in-
At the, end of their day i
ington, the Aramco men
sadly back to Jungers i
Arabia that there was ` a 1
gree of disbelief' that an3
-action was imminent. 'S
lieve that His Majesty is
wolf where no wolf exists
in his imagination.'
But the four compani
wanted to show the King t
were trying to influence A
opinion ; each wanted to
its future share of the con
and they soon vied wi
another to show their hell
The most assiduous was
who had the smallest sl
.Aramco and the . most urge
for oil.
n Wash-
cabled
a Saudi
arge de-
r drastic
ome be-
calling
except
es still
fat they
merican.
protect
cession,
th one
fulness.
Mobil,
are in
at need
Mobil, always the most publicity-
.
minded, prepared an advertisement
for the New York Tutee on 21
June. It was very ca ttiously
worded : it explained how merica
was becoming increasingly depen-
dent on imports from Saudi Arabia,
how relations were deteriorating,
coiicluding that it was ` ti ne now
for the world to insist on a settle-
ment in the Middle East.' But the
New York Times though it too
inflammatory to go opposite the
editorial page, the usual position
for. Mobil's advertisements. In
Saudi Arabia, neverthel ss, the
advertisement had the t equired
effect: Yamani wrote a etter to
Mobil recognising this `positive
step.'
Exxon were rather more
in their support of the
They decided against adv
and Howard Page gave a s
cal relationships between
and the Arab countries.
-. Over in California, Socal
worried that they were
behind. Consequently,
very conservative chairm
. holders on 26 July,. urging
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Saudis.
rtising,
mieson,
iington,
eech in
Ameri-
out the
politi-
lipping
Socal's
share-
hat the
 CPYRGHT
US 1AA~,e
$hou D~iiv
AO
the Aramftl I I i tS~se 1 i grt~*!s',~"1-vl~l ritdtt-Y3i V194
acknowledge the legiiuate in.
terests of all the peoples of the
Middle East.. . The letter was
well-publicised; and caused a small
furore among Jewish communities,
especially in San Francisco.
There was also plenty of activity
from Jack McCloy, the 78-year-old
elder statesman of the oil industry,
and the lawyer representing all
seven of the ' sisters,' from his
august law firm above the Chase
Manhattan Bank. He talked to his
friends in Washington; he warned
Sisco that the Saudis meant what
they said, and he urged Kissinger
to ` try to mediate.:.. that ` the
Administration mustn't just think
in: terms of the next New York
election.'
The companies were certainly
:persistent enough in their attempts
to influence foreign policy; why,
then, did they have no discernible
.effect ? What had happened to the
`legendary power of the American
oil lobby ? Had not the Texan.
--leaders, Sam Rayburn and Lyndon
Johnson, ensured for years that the
oil industry maintained its tax
-,benefits ? Had not the oil com-
panies given at least $2.7 million.
to President Nixon's campaign ?
Had not Otto Miller of Socal him-
sell! given $40,000? Had not Gulf
.Oil directors given over $1 million,
'including a secret gift of $100,000,
with the express understanding
that they would be 'on the inside
.track' ?
Yet, when the moment came and
four huge global companies, with
billions of assets behind them,
wanted. to pass on a simple critical
message from King Faisal-a mes-
sage which turned out to be per-
fectly correct-they apparently
had no influence whatever.
There were several explanations.
First, the Israeli lobby in Wash--
ington was undoubtedly far
stronger, and far better organised,
than the oil. lobby; and American
intelligence about both the em-
bargo and the prospects of war
was heavily influenced by the
,Israelis, who turned out to be so
strikingly wrong. Second, the
Administration, having success-
fully separated the two strands of
Middle East foreign policy for so
long, found it hard to imagine
their coming together.
But, third, the American oil-
men-as some of them wryly
admit-had lost nearly all of their
credibility in the previous years.
Their information was clearly self-
interested, and they had been cry-
`.ing wolf for too long. The ultimate
roots of the public distrust went
right back to the foundation of the
"industry, to the arrogance and
mendacity of the original Rocke-
feller monopoly : and more recent
abuses, including the arrogance of
the Texan oil lobby and the
studied secrecy of-Aramco, had all
city members. had become much
more sceptical about oil company
pressure. So it was not altogether
surprising that when the companies
did have something, serious to say,
hardly anyone believed them.
While Washington was thus
uninformed, in Egypt President
Sadat was significantly shifting- his
alignments. At the end of August
he had been expected to consum-
tnate the merger between Egypt
and Libya for which Qadhafi had
been pressing; but Sadat agreed
only to a general statement of
unity, which left Qadhafi dis-
gruntled, and after the talks Sadat
flew to Saudi Arabia for a secret
visit to King Faisal. The meeting
was momentous: Faisal promised
Sadat that, if American policy in
the Middle East didn't change, he
would restrict the increases of oil
production to 10 per cent a year-
far short of Arainco's require-
ments. Thus Egypt, for the first
time, began to have effective oil
pressure behind her diplomacy.
Just after the visit, Qadhafi,
celebrating the fourth anniversary
.of the Libyan revolution on 1
September, announced that he
would nationalise 51 per cent of
all the oil companies operating in
Libya, including the subsidiaries of
Exxon, Mobil, Texaco, Socal and
Shell. Two days later, the Libyans
announced that the price of Libyan
oil would go up to $6 a barrel-
twice the Persian Gulf price-and
threatened to cut off all exports to
America if Washington continued
to support Israel. Two clays later,
all 10 . Foreign Ministers of the
Arab oil-exporting countries
(OAPEC) met to discuss the pos-
sible use of oil as a weapon to
change American policy: and a
fortnight afterwards Sheikh Yam-
ani formally warned the US that
there could be a cut-back of Saudi
Arabian oil.
President Nixon appeared on
television to warn the Libyans of
the dangers of a boycott of oil,
.reminding them of the experience
of Mussaden in Iran 20 years be-
fore; but nearly everyone knew.
that the threat was hollow. As Ian
Seymour wrote in the New York
Times: `Could it really be that the
President of the US had not yet
grasped the predominant fact of
life in the energy picture over the
coming decade, that the problem
is not whether oil will find mar-
kets, but whether markets will
find oil?'
The Libyan crisis injected a new
element of urgency; and the Euro-
pean Governments, being more
dangerously dependent on Arab-
oil, made clear their concern to
Washington.
At just this time-the very worst
time-the 1971 Tehran agreement
over oil prices, which had lasted
~y~p
1 ve rs but had al-
t 1u u4't3 beyond recog-
nition, was finally breakin down.
On 16 September, the 11 members
of, OPEC asked the oil companies
to attend a special conference in
Vienna on 8 October to discuss sub-
stantial increases.
The oil producers knew that they
were in a powerful position, in the
face of a. potential shortage, and
that the 'companies' own bargain-
ing position was weak. But it was
some time before they realised the.
full extent of that weakness.
And then, two days before the
OPEC conference assembled, Egypt
and. Syria invaded. It was now
all too clear why King Faisal's
warnings had been so emphatic; for..
his own position, as the lonely Arab
champion of American policy, was
now untenable; and oil and politics
were now totally intermixed. The
war and the negotiation coincided,
with a timing that was soon to
prove expensive for the oil consum-
ing countries, beyond- their worst
.nightmares.
-
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 CPYRGHT
WHEN the Middle Last War was
two days old, on 9 October 1973,
the delegates of 20 oil companies,
led by George Piercy of Exxon
(Esso), met at Vienna to 'discuss
oil prices with six members of
OPEC. The timing, from the com-
panies' point of view, was disas-
trous. It was clear that oil and
politics were now suddenly
thoroughly intermixed. The Arab
representatives were excited and
unified by the war, and were soon
passing round newspaper photo-
graphs of American supplies to
Israel. The war had added fervour
and unity to their bargaining.
But with or without a war, the
companies were in a very feeble
bargaining position. The Teheran
agreement of 1971, which had fixed
the oil-price at S3 a barrel, was
now clearly, as one oilman put it,
a `house of cards' which had
already tumbled. The Iranians had
already made it clear that they
wanted to go up to $5 a barrel.
The grievances of OPEC were, in
fact, very real; the inflation facwr
of 22 per cent a year had not kept
pace with actual inflation, and the
price of other commodities, as the
Shah never ceased to point out, was
far outstripping oil. And OPEC
was now in a position-which the
companies took some time to
realise-to enforce their own price.
OPEC's 13 years of disunity and
humiliation were over, and the day
of reckoning was near.
After four fruitless days in
Vienna, with the war gathering
force in the background, the six
OPEC countries were still standing
firm, and it was clear that they
would not settle for less than $5 a
barrel. Soon after midnight on the
fourth day George Piercy called on
Sheikh Yamani, the Saudi Arabian
tal Hotel, and explained that the
companies could not give way
further without consulting their
home governments-which would
take two weeks.
Yamani was silent for 10 minutes,
offered Piercy a Coke. slowly
poured it, slowly squeezed a lemon:
he seemed surprised and distressed,
and later began pointedly looking
at plane timetables for his journey
back to Riyadh. But Piercy in-
sisted : he must have two weeks to
consult.
The next day the conference dis-
banded, and was never recalled;
the OPEC countries announced that
they would meet on their own the
next week in Kuwait. The news of
this critical breakdown, which had
such historic results, was swamped
by the war news; it was tuned on
the business pages of The Times
and the New York Times, and even
the Financial Times printed it on
.page 13. What would have hap-
pened if the companies had agreed,
there and then, on a S5 increase ?
It is a question that haunts at least
one of the negotiators.
Meantime in New York the
Aramco delegates were now des-
perate about their companies'
survival, and they turned once
again to Jack McCloy, their veteran
legal adviser, to press home their
case to Washington. _I~IcCloy prom-
ised to get a letter to the President,
and wrote to General Haig at the
White House, by special messen-
ger, enclosing a memorandum to be
passed on to both Nixon and Kiss-
inger.
The memo was signed by. all
four chairmen of the Aramco
-group, Jamieson of Exxon, Gran-
ville of Texaco, Miller of Socal and
Warner of Mobil-and it empha-
sised that any increased American
military aid to Israel `will have
a critical and adverse effect on our
producing countries.' The Euro-
peans, warned the chairmen, could
not face a serious shut-in. and ' may
be forced to expand them Middle
East supply positions at our ex-
pense.' Japanese, Europ an, and
perhaps Russian interests might
well supplant United States
presence in the area, ` to the detri-
ment of both our economy and our
security.' It was a characteristic
confusion of arguments, military
and commercial: American oil
must be protected from both Euro-
pean competition and a Russian
invasion.
General Haig took his time in
dealing with the letter; th ee days
after its delivery, he re lied to
McCloy (` Dear John') s wing, ` I
will see that the letter is fo -warded
to the President and to S cretary
Kissinger.' But in the intervening
weekend Kissinger and Nixon,
alarmed by reports of Soviet ship-
rnents to the Arabs and the Israeli
predicament, had authorised the
immediate airlift of military sup-
plies to Israel.
The next week, on 16 October,
four Arab Foreign Ministers
arrived in Washington, le by the
most crucial, Omar Sagq f, then
the Foreign Minister o Saudi
- Arabia-who was much iniore in-
fluential with the King than Sheikh
Yamani. Sagqaf was in a very bad
mood; Nixon hadn't been able to
see hirn that day, and at a press
conference one American reporter
said that the US didnt need
Saudi Arabian oil, that th Saudis
could drink it; Saqqaf rep ied bit-
terly `All right, we will.'
The next day, after a last minute
warning from Aramco, Nixon and
Kissinger agreed to see Saqqaf
and the other three Foreign Min-
isters for a long talk and lunch,
followed by a talk with Ki singer.
Saqqaf gave Nixon a letter from
King Faisal, stating that if the US
did not stop supplying Israel
within two days there w uld be
an embargo. But Nixon explained
that he was committed to support-
ing Israel; and on the same day the
Senate voted by two thirds to send
reinforcements. Saqqaf cae out
of his meetings, as he expnlained
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 to ? realise their strength: on 16
-October they announced that they
..would raise the oil price to $5.12
a barrel-a figure which then
seemed. appalling to the West. The
next day they voted to cut their
production. by five per cent per
month, until Israel withdrew to her
1967 frontiers.
Three days later, after Saqqaf's
return from America, came the
real bombshell. Washington
--never believed it would happen.
Saudi Arabia, far from distancing
herself from OPEC, announced a
cut-back of ten per cent, plus an
embargo on all oil to the US and
the Netherlands. The OPEC ring
had now closed tightly round the
consumer countries, and the pro-
~.ducing country that Americans had
,regarded as the safest was now the
most determined to show its firm-
ness. .
The implementation was to be
immediate, and the next day the
'Saudis cut back production by
inpre than 20 per cent. In Riyadh,
Yamani and other Saudi Ministers
summoned Jungers of Aramco to
discuss the enforcement of the
embargo: the Saudis (Jungers
noted) appeared glum and dis-
illusioned with the US. They had
already worked out the embargo
in some detail, and they insisted
that apart from the 10 per cent
cut-back, Aramco must also sub-
tract all shipments to the US
including to the military: Aramco
would have to police the whole
complex operation, and any devia-
tions from the ground rules would
be harshly dealt with.
Jungers pointed out some of the
effects of the rules; for instance,
that Italy and Japan would be
specially hard hit. Yamani
remarked that this was deliberate,
implying that they were being
punished for pro-Israeli attitudes.
If this embargo didn't change
American policy, Yamani ex
plained, the next step would 'not
just be more of the same':
Jungers had no doubt that he
meant complete nationalisation, if
not a break in diplomatic relations.
It was a crisis of identity for the
Aramcans (as the employees of
Aramco call themselves), for where
was their ultimate loyalty?. At the
height of a war, with highly-
charged American public opinion,
they were required to be the agents
of an Arab Government in enforc-
ing an embargo, including a mili-
tary embargo, designed openly to
change US foreign policy. The
whole past justification for Wash-
ington's diplomatic support of the
companies in the Middle East-
that they were essential to national
security-was undermined, just
-when the US Sixth Fleet was being
held in readiness in the midst of
their company engineers put it)
have `taken them off the hook.'
Back in June the Aranico engineers
had been having some difficulties
with the technique of forcing oil,
out through water-injection: the
vast expansion of production was
proving rather harder than ex-
pected, and the temporary reduc-
tion forced by the embargo would
`Oil producers
were convinced
they had been
diddled for
decades'
have technological advantages. But
the long-terns prospects for Aram-
co's expansion were still glittering
-provided they could keep the
trust of the King.
In the meantime Kissinger was
in Moscow, where lie and Brezhnev
each agreed to bring pressure on
his client-state. By 21 October,
when the embargo was proclaimed,
the Israelis had agreed.to a cease-
fire in place, and the next day in
New York the Security Council
unanimously adopted the call for
a cease-fire by the two super-
powers.
The Aramco directors heaved a
sigh of relief, and by 24 October
their man Jungers was able to send
a more optimistic message back
from Saudi Arabia. 'No question
that Saudi Arabian Government
mood now more relaxed,' lie cabled
to Socal, `but one of cautious anti--
cipation.' But, he warned, the
King was still radical on the point
of Jerusalem, ` always the most
sensitive and uncompromising
issue with His Majesty' and there
was ` absolutely no question that
the oil cut-back would remain in
effect until the entire implementa-
tion was worked out.' One Saudi
contact told Jungers that there was
` great satisfaction' with Aramco
for its pro-Arab stand, and re-
marked `we hope to reward you'
-which Jungers, interpreted as a
promise to allow future growth.
Aramco was closely in touch with
Jim Akins, the former oil expert
in the State Department who was
now Ambassador to Saudi Arabia.
On 25 October Akins sent a confi-
dential message to Aramco, that
the oil tycoons in America should
hammer home to their friends in
government that oil restrictions
would not be lifted 'unless the
CPYRGHT
tions problems,' Akins pointed out,
with considerable understatement,
between the industry and the
Government; and the oil com-
panies must put their views in a
clear unequivocal way-, Akins's
message was duly transmitted the
next day to the four Aramco part-
ners in New York and San Fran-
cisco. It was an odd reversal of the
diplomatic process, to find an Am-
bassador urging industrialists to
exert pressure on his own depart-
ment, knowing that he could not
achieve it himself.
Meanwhile the Aramco directors
still had to carry out the King's
orders, even though these were
directly against their own coun-
. try's ; interests; and the Saudis
soon asked them to give details,
country by country, of all the Saudi
Arabian crude oil used to supply
the American military bases
throughout the world-all to be
supplied in two days.
In New York two company
officials, from Mobil and Texaco,
were reluctant to release such sen-
sitive information. But Exxon, as
always the senior sister, reassured
them that they had consulted with
the Defence Department. It was, in
fact, a very peremptory consulta-
tion; Admit-al Oller, who was in
charge of Defence Fuel, was con-
cerned about such information
reaching the Saudis, particularly at
the time of the world-wide alert;
blithe did not hear about it until it
was a fait accompli.
The details went back to the
Saudis, and the companies were
duly instructed to stop the supplies
to the military. Exactly how seri-
ous was the cutting-off remains ob-
scure, and surrounded by secrecy.
The Sixth Fleet certainly con-
tinued to receive enough supplies
from other sources. But the
Aramco partners were now very
exposed to the charge that had so
often been made against oil com-
panies in the past : that in a crisis
they were not ultimately patriotic.
In New York, it was all too
evident that they were carrying out
the instructions of a -,foreign
-Government; and however much
they insisted that they had no alter-
native, short of being confiscated,
they had few public figures on
their side. In the midst of the most
Jewish city, they stood out as a
pro-Arab enclave. -
The topography seemed si m-
'bolic : on one side of Sixth Avenue
in Manhattan stood the three sky-
scrapers of the three TV networks
-CBS, NBC, ABC-all of them
very sympathetic to the Israeli
cause, and deeply. critical of the
oil companies. On the other side
stood the headquarters of the two
key companies : Exxon's new sky-
scraper and the two floors of
Aramco, at Fifty-fourth Street.
It was as if the Avenue was an
impassable frontier, like the River
Jordan ,itie~f~nJ,j}~i~lcethc Aranico
 trainees, pi Vpyktj lease 10 }Xf?"M g' 1
engravings o abra, au r ti i~ . e e
those bleak colour photographs of prices had not been an Arab
.pipelines in the desert. so much at all, but the Shalt of Iran; and
,favoured in oilmen's offices. the other most demanding country,
To the media, across the avenue, in OPEC was Venezuela, 8,000 miles
Aramco appeared an all-powerful away from the Persian Gulf.
supra-government, a consortium of ,_ Even without the war, the basic
four of the richest companies in fact could not have eluded the
the world in league with an alien members of OPEC for very long:
-,sovereign State. But the Aramco that the consuming countries were
men in New York saw themselves dependent on a . small group of
as persecuted and encircled; anony- exporters, who were able by
mous telephone callers rang up restricting production to control
with bomb scares to make them the price. It was the same basic
troop out of the building, and with fact that had been discovered by
threats and insults against the oil John D. Rockefeller a century be-
traitors. fore, when the whole oil monopoly
There was little middle ground : had been controlled by 'a hand-
each side had its own view of the ful of men,: now it was a handful
priorities of foreign policy,. and of countries. The oil companies had
each had a profound distrust of the seen the weapon which they them-
other. The clash meinevi selves had forged turned suddenly
for tke opposing interests which
Washington had so carefully kept back on themselves.
apart for the last 25 years, could But a critical question remains
no longer be kept separate. What to be answered : will the OPEC
was remarkable was how few cartel still hold together after the
people had foreseen the clash, and immediate cause of its unity has
the disaster that followed. disappeared and the Arab-Israel
The shock caused by the- oil conflict is resolved with a settle-
shortage was so acute-particularly ment ?
in Atnerica-that it was some time
before people realised that- the
embargo was only part of the
trouble : what was more import-
ant was that the OPEC countries
were 'now united, and could raise
the oil-price as high as they wished.
And as if to make the point clear
to OPEC, the smaller oil companies
now began hectically buying oil at
any price they could; at an auction
in Iran in December they went up
to $17.
The moderates in OPEC were
now more convinced that the
radicals were right : that for
decades they had been diddled.
The major oil companies
by now realised that they were
not now negotiating at all; they
were waiting for . unilateral
demands. By 23 December the
Persian Gulf members of OPEC,,
encouraged by the auctions, an-
nounced that their oil-price would
be doubled again, to $11.65 a barrel.
In New York the oilmen had a
sour joke with their returning
negotiators: `Congratulations on,
not accepting. more than the Arabs
demanded.'
~- "What, in fact, was the chief cause
of the huge leap in the oil price
has been argued by oilmen ever
since. There is little doubt that the
Middle East war had accelerated
and precipitated the crisis; it
unified the Arab members of
OPEC, and brought the Saudis
into line; without it, the price,
could have stayed around $5 for
some time. `The Arabs' became a
kind of synonym for the OPEC
cartel, but it was a misleading
4A000100460001-5
CPYRGHT
Approved For Release 1999/09/02 : CIA-RDP79-01194A000100460001-5
 Page 35
War-The Ultimate Antitrust Action
By Andrew Tobias
The unthinkable alternative is now being openly
discussed as a solution to. the world's oil-related
economic problems. It is almost unanimously re-
jected-for now. But there is some sentiment in the
land that, if the O.P.E.C. countries should become
totally unreasonable, they could eventually drive the
United States, or some other country, to desperate
acts. Andrew Tobias surveys the range of opinions
and discusses some of our more peaceable alterna-
Is the Pardon Explained
even some of his most patient well-wishers were out-
raged and mystified by President Ford's sweeping
pardon of Richard Nixon and by the deal that ulti-
mately puts the White House tapes in his care. Over-
looked, if not studiously ignored, by those able to
.look into the matter, notably Congress, is the fact
that Gerald R. Ford himself was a frequent visitor
..in the bugged Oval Office and is, therefore, a crux
cial entry in the Nixon tape ,;}rchives. Could it br
that the tapes of those visit9;.plus those of other key
Republicans, hold the key to Mr. Nixon's otherwise
Page 46
Amazing Moms
She's a great-grandmother- now, but that. hasn't
slowed Moms Mabley one little bit. One of the great,
raucous performers in the.first glow of black enter-
tainment in America-a comic and actress who
played the Cotton Club in 1927, toured with "Bo-
jangles" Robinson, Cab Calloway, Ellington, and
Basie-Moms is about to send her 100-pound self
into yet another orbit. She's starring in a. movie
called Amazing Grace, due to open here next month.
Mark Jacobson sits down to a game of checkers
with the Great Lady-an unequal contest at best-
and then hears her out on a passel of subjects in-
cluding young age, old age, show biz, and her own
Clients to Make a Decorator Tear His Hair Out
By Billy Baldwin
Interior decorator to the elite for as long as anyone
wants to remember, Billy Baldwin is ready to do
some remembering himself. In this chapter from his
forthcoming Billy Baldwin Remembers, Billy sum-
mons up the weird hassling he's been through at
the hands of some of his illustrious clients. The list
includes the late Billy Rose, along with several oth-
ers whom, still being alive, the author has mercifully
draped in anonymity.
Page 70
Movies: Past Imperfect, Present Perceptive
By Judith Crist
Louis Malle's Lacombe, Lucien compellingly sur-
veys the small man caught up in large crimes.
Page 75
Theater: Hope Against Hope
By John Simon
Some glimmers of unguarded optimism appear here
and there, but Mr. Simon doesn't share them.
Page 76
Music: Sunday Punch
By Alan Rich
The Sunday Times's Arts and Leisure section has
become a lot more voluble than valuable. .
Page 81
Books: Now It Can Be Told, Told in AU Its Gory
By Eliot Fremont-Smith
Some famous recent murders have made the inevita-
ble, but successful,, transition to hardcovers.
Page 10
The City Politic: Autumn for Henry
By Ted Szulc
In these darkening days for Henry Kissinger, our
secretary of state ran his diplomatic minibus through
the streets of New York last week and got messed up.
Page 12
The Bottom Line: Wall Street's Next Big Worry
By Dan Dorfman
There's a $15-billion bundle of stocks overhanging
the market, belonging to fire and property underwrit-
ers. They are hard pressed and, maybe, ready to sell.
The Passionate Shopper: House Beautiful
By Deborah Haber From massage to beard-trim, there's hardly a beauty
service that you can't have performed in your own
home. Ms. Haber, therefore, describes all those peo-
ple in town who, having skills, will travel
Page 94
Food: Sendoff
By Mimi Sheraton
The home front becomes even more interesting as
Ms. Sheraton describes all the food delicacies, some
of them original and rare, that you can now order
by mail.
Page 8: Letters; Page 15: In and Around Town
Page 68: Best Bets, By Ellen Stock
Page 84: New York Intelligencer
Page 96: New York Classified
Page 102: New York Real Estate Classified
Page 105: Sales & Bargains, By Sarah Harriman
Page 106: Competition, By Mary Ann Dolby Madden
Pnr r[lR? i nndnn Cnnrtay Tarn C .r. ?,prd
Cover: The Unthinkable Made Clear, by Julian Allen.
The following are registered trade names, and the use of these names is strictly prohibited: The Artful Lodger, Best Bets, Best Bits, The Bottom Line,
The Capitol Letter, The City Politic, Cityscape, The Global Village, In and Around Town. New York Intellittencer, The Passionate Shopper, and The
Urban Strategist. New York is published weekly (except for a combined issue the last two weeks in December) by the NYM Corporation, 207 East
32nd St., New York, N.Y. 10016. Copyright (j 1974 by the NYM Corporation. All rights reserved. Reproduction without permission is strictly pro-
hibited. Milton Glaser, Chairman; Clay S. Felker, President; Ruth A. Bower, Executive Vice-President: John C. Thomas Jr., Vice-President, Marketing:
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For subscription information, write Joseph Oliver, New York Magazine, Subscription Department, Box 2979, Boulder, Colorado 80302,
Approved For Release 1999/09/02 : CIA-RDP79-01194A000100460001-5
 Approved For Release .199
{Q.-,RDP79-01194A000100460001-5
The 1t3~
ntitrust ction
By Andrew Tobias
"... Could we, technically, pull off an invasion of one of the na-
tions belonging to O.P.E.C.? If so, should we do such a thing?
And in any case, might we, or some other country, try it?..." -
With the world walking along the "My initial reaction to that whole try. And 1-think Ford is setting up
edge of financial collapse, depression, military scenario," a Federal Energy these summits as a way of preparing
and massive human suffering (in the Administration official told me,'"'is that the public for severe measures that
less-developed countries), a number it's a bunch of goddamned New York have to be taken. As a result, there
of influential people-most notably the bankers trying to protect their invest- will be a period of a year, or whatever,
president of the United States and his ments, overseas." while these measures are being t ken,
secretary of state-have recently be- In fact, opinions among New York and while there is still hope of getting
gun talking about ho'w unthinkable, as bankers vary. But it's true that they this thing under control. But I think it
a solution to our oil-'related economic have been thinking about the prob- will be very hard to reorient a ship
problems, military action would be. lem. "Jesus, your timing is uncanny," that's so far turned. (I'm not saying,
That in turn has started some people one investment banker told me, again by the way, that I think the Arabs are
thinking about military action. before the president's speech in Detroit. the only ones responsible for our rob-
Even before the twin Ford/Kissinger "We had a long debate about that last lems; American. economic poli ies-
speeches of September 23, which a night." I interviewed both sides of the guns and butter, : etc.-are responsible,
Kissinger aide confirms were indeed debate and offer them as being fairly too. Not to mention just the wea her.)
coordinated, serious people were con- typical of what's being said these days: "You 'know, six months ag this
sidering-and almost unanimously re- NAVY PINSTRIPE: "If things really would have been looked on as totally
jetting-war as a solution to our prob- get bad in this country, the potential unacceptable conversation, okay To-
lems. They are still almost unanimously social upheavals will force the govern- day it's acceptable, and almost reason-
rejecting it. But that they would con- ment to look outside. And if the gov- able, but people have an emotional
sider it -at all is a measure of the ernment wants to preserve itself, or if revulsion to war and it's talked abut in
gravity of the world situation. the system wants to preserve itself, it muted tones. Six months from now I
And there are those few serious peo- will naturally have to take into con- think it's something that will be talked
ple who have considered it and, pri-. sideration what the hell are 6 million about among serious people as seri-
vately, advocate it. (Whether they people in Saudi Arabia or 3 million. ous alternative. And a year fro now
would actually give the command if it people in Libya or I million people in I think it might be fashionable."
were theirs to give is another story.) the Trucial States-what the hell right CHARCOAL PINSTRIPE: "I thin it's a
Early in September, before talk of do they have, as it would be put, to put totally crazy idea. There migh con-
confrontation was making headlines, us out of business, in effect? And when ceivably be a scenario where it could-
the director of research of a prominent people get desperate, they can find be justified-if they refused to ell us
Wall Street firm told me that he thought plenty of rationalizations. 'We found any oil at all, for example-a d the
the United States should, now, seize that oil, we invested in it, we had con- argument might-have some more eight
the Saudi Arabian oil fields, or get tracts for it. . . .' You can make thou- after we had gone through som very
someone else to do it for us. A well-sands of arguments. austere moments , but to consider
respected leader of the financial com- "The American people are just not it now?
munity, strictly off the record, agreed. going to put up with not owning their "The argument for doing i , you
And while neither anticipated imme- own houses, with high unemployment know, can best be summed up 'Are
diate action, both thought that a vio- . . . the American people will turn, we going to let a bunch of desert
lent outbreak over the Persian Gulf oil aggressively, to look for the cause. nomads hold us ransom and hold the
treasure, in one form or another, was ["My clients are really enraged," an whole world ransom-these people who
almost inevitable. institutional salesman told me, "that -live in tents?' And in fact I head that
Walter Levy, the best-known inter- we could have lost so much in Viet- expressed with a certain amo nt of
national oil expert, while he does not nam, and then here, where, our vital sincerity by the president of a inter-
advocate the use of force, fears that interests are at stake, we do nothing."] national copper company.
nations may be driven to irrational "I don't see this happening in the "But besides its being offensi e, it's
acts-and in the not too distant future immediate future because there are a ludicrous. Saudi Arabia happen to be
-if what he calls "unmanageable oil lot of steps that can be taken in the one of our close allies. We would so
prices". are not reduced. Interim to conserve energy in this coun- shock and horrify our friends.t a Iran-
 CPYRGHT
Approved For Release 1999/09/02 : CIA-RDP79-01194AO00100460001-5
is to be an ally of these guys. Not to
mention the rest of the oil-producing
countries.
"You know, invading Saudi Arabia
is not what the cold war equation is
all about. The Soviet Union would
probably oppose us and oppose us very
strongly were we to consider such a
thing."
NAVY PINSTRIPE: "It's my personal
point of view that the Russians will
never fight a war with the Americans
over something other than an invasion
of Eastern Europe or the Soviet Union.
The Russians, in my negotiations with
them [Navy Pinstripe does a lot of
East-West 4rade-deals], are very pru-
dent and cautious people. They drive
a hard bargain and are full of bluster
-until they see that you are really
walking away. And I think they would
do the same thing here. If they knew
that it meant survival to the West. and
that we meant business, :the Russians
would never fight a war`\,over people
that they themselves don't rdspect. Re-
member, the Arabs are not liked in
Russia. You don't think the Russians
are going to risk their whole country
for Libya, do you? [A variant of this
argument is that we would "simply
make a deal with the Russians." An-
other wheat deal, perhaps.]
"There is no question in my mind-
that seizing and maintaining the Saudi
oil fields would be a minor operation
from our point of view."
CHARCOAL PINSTRIPE: "Bullshit. You.
can't get marines over there until you
start flying them, and you can't pro-
duce a massive airlift without mobiliz-
ing a certain amount of our own
forces; or else you would have to send
the bloody Sixth Fleet [Charcoal Pin-
stripe is a lieutenant commander in the
reserves] all the way around the horn
of Africa and get it off the coast of
Saudi Arabia-unless you wanted to
march them across Egypt and across
the canal and down the Sinai Penin-
sula, and eventually into Saudi Arabia.
If you did manage to take it over, you
would have a tremendous amount of
patrolling to do to try to prevent sabo-
tage of the pipelines, which extend all
over the, country, and you'd end up
with a mini-Algeria.
"And I 'think from a cold war point
of view this would have horrendous
results. And it would have absolutely
no justification in fact! This inflation
problem has been largely self-created,
and we cannot blame the Arabs for it.
In Italy it's the militant trade unions,
more than the Arabs, who have gotten
things so messed up. The Arabs have
done something that is perfectly ra-
tional from their standpoint-they've
e as t ey can,
"You know, one of the things that
traditionally happen-it happened in
Germany, it happened in Japan-is the
foreign-devil theory, where people take
internal domestic problems and say
these are caused by the foreign devils
who are raping the country, and all
that sort of thing. I would be very
concerned if we had some demagogue
say that the way to get out of this is to
beat the Arabs up and get cheap,
abundant oil. Its a dangerous topic;
people get easily carried away."
Around this point in the typical de-
bate one party starts talking about the
United States as a diabetic and the
Arabs as withholding our insulin un-
less we pay outrageous prices; the
other party talks of the United States
as a heroin addict about to mug the
Middle East; and the first party insists
that it's the Middle East mugging the
heroin addict-and that being hooked
on energy is more constructive than
being hooked on heroin.
But it is time to open the discussion
to the rest of the wardrobe of opinion-
Could we, technically, pull off an in-
vasion of one of the nations belong'
ing to the Organization of Petroleum
Exporting Countries (O.P.E.C.) and.
keep the oil flowing? (Saudia Arabia is
the country most often considered, be-
cause it has most of the world's
oil, a small population, and`an even
smaller army. Though, in fact, it is
the Venezuelans and the Iranians who
seem to be putting the screws to us
most, tightly.) If so, should we do such
a thing? And in any case, might we
or some other country try it?
Herman Kahn, the futurist: "It
would be fairly easy to knock over any
one of those countries-but you got to
go in and kill people to do it. It's very
difficult to kill people on an enterprise
that's immoral, illegal, and long-lasting.
Day after day those pictures would
show up on television: two Arabs
killed, ten Arabs killed." Herman
Kahn doesn't see it happening. We
haven't the stomach to mount such an
enterprise now, he says.
Tad Szulc, the journalist: `It would
be a terribly foolish thing to do, open
a can of worms-but having said that,
there is always someone who is foolish
enough to do something like this."
Someone like us, perhaps? "Look,"
Szule says; "there's contingency plan-
ning for anything you want to mention,
because there are an awful lot of col-
onels and generals who do nothing but
plan contingencies, you know. And I
think every government has got a con-
tinency plan for invading the moon.
with conventional forces. But I just
don't see am body at this stage making
months from now.... Obviously there
is no policy here."
A noted British financier: "Well. I
would think it's unlikely in the course
of a rear. I .would think the time for
that kind of talk would have been back
when the increases were put on. Amer-
ica doesn't suffer enough from this.
and America is really the power that is
most likely to get round to that line of
thought. Japan is the other one.
Professor \,I. A. Adelman. of \i.i.T..
has never been considered "soft" on
what he terms "Arab blackmail." In
fact Forbes labeled him a "gunboat
professor." But tinder most circum-
stances. he would not advocate an at-
tempt to seize the oil.
"What I am told," he savs. "is that
such an operation would be feasible if
you mounted a sufficiently large effort
from the beginning. Which means
you've got to have all your technicians
on board. land them quickly. and get
started. You can restore oil fields that
have been blown lip. Experience in
World War 11 indicates that.
"But whether it should be done all
depends on what the alternatives are.
If you had a cutback of 25 per cent of
the oil production in most of these
countries, the way you had last fall, I
would suppose that it would be an
overreaction, and you wouldn't want to
do it. If there had been a 100 per cent
cutback. or even a good deal less than
that. then it's not a question anymore
of should it' be done-it just would be
done. Because the nations Wouldn't let
themselves starve and freeze in the
dark. Period. And you can quote me
on that. because it' seems just obvious.
I'm not even advocating anything.
There's nothing to advocate. The con-
surning countries would just move in.
It's just like predicting a change in
the weather, only with a much greater
chance of success."
And what if - production were not
cut back substantially. but prices were
kept at the current level or even raised
a bit? Send in the marines? "It's just
not true." insists the gunboat professor..
"that we can't live over the next five
years with these prices. You can keep
these figures in mind, and you can
quote them: the O.P.E.C..loot amounts
to about S100 billion a year, and world
G.N.P. is about S5.000 billion. So it's
a matter of 2 per cent. Well, the world
can live with that. Now, for countries
like the U.S.A., it just means that we
pay a bit more. We transfer our wealth
abroad in return for oil. In countries
like India, it really is an acute crisis
and undoubtedly it means starvation
got a dwin4p ro icVgs r~?c~cF3cc T~ilYgr/d`C~ `~ ? `?~~A~~ ~1~3If 1't' 94-A-000100460001-5
 CPY GHT
for many thousands of Indians. But to it, and maybe fresh eves can read it oil will ring, and so a ct to pric
righily or wrorAppi'Owedl FortReleasen$9$91O erc1AvRQRRi9a01194r4O0l0O46100??1L5 m litary and
like it do not have the political power
to do much about it, and indeed they've
been almost as painfully obsequious
and lickspiule to the producing coun-
tries as the United States has.
"So, like it or not, the world can
take it perfectly well, and will take it,
and I would say nobody can have much
confidence in whether prices go much
higher or much lower, but I give a
slight edge to pries going higher."
As for the damage that massive
"petrodollar" accumulations are caus-
ing the world financial system. Adel-
man agrees the damage is real, but
maintains it is "essentially a temporary
problem."
If you can't get a gunboat professor
to salute when you run this invasion
scenario up the flagpole, you won't get
as much as a click-of-the-heels from
within the State Department itself. "it
makes no sense whatsoever," My Source
told me with what appeared to be spon-
taneous sincerity. (After reading Tin-
ker. Tailor. Soldier, Spy-or. come to
think of it, the Watergate tape tran-
scripts-I take nothing at face value It
"People talk about seizing the Saudi
oil telds? There are so many reasons
. it's the most absurd thing I've ever
heard of. That's my problem. I guess
[in being a little at'a loss for words].
because in the first place, I can't con-
ceive of a situation so shortly after Viet-
nam where this would be generally ac-
cepted by the American people-unless
it, you know, I could. I suppose, imag-
ine a situation if our industry had
ground to a halt because we didn't have
oil that maybe if it got bad enough the
frustration level might reach a point
where it might be acceptable. but cer-
tainly it would take a great deal. more
than the currently foreseeable prob-
lems. Beyond that, the number of forces
that would necessarily be involved
would be great. Quite great. And be-
yond that. nobody in his right mind
would expect the Soviets to stand by
and watch it happen. So I just think
there are any number of reasons why
it's patently absurd."
In his speech to the U.N. last month
Kissinger scared. hell out of some peo-
ple when he said, "What has gone up
by political decision [O.P.E.C. oil
prices] can be reduced by political de-
cision [the question is. whose?]."But
My Source, who "worked closely with
Henry. on this speech." says that "in
the first place. . it never entered our
heads that the speech in any way im-
plied any form of military interven-
tion. In fact. I can read through the
entire thing and not find a veiled threat
anywhere, though I will admit that
that's to a degree because I'm too close.
I think it was a gloomy speech-I
think it was a gloomy subject. But I
don't accept that it was threatening in
any way."
And, in fact, taken at face value and
read in its entirety-not in snippets out
of context-the speech seems more an
urgent call to cooperation than a call to
arms. Talking about nuclear prolifera-
tion, massive starvation. and the break-
down of world economic order, Kissin-
ger was pointing out, urgently, that
these are threats inherent in the present
world situation-and that therefore co-
operation is essential. You can read
that "Cooperate or we'll beat your
brains out." Or you can read it "We
must all cooperate. or we shall sink
together." The only thing is. admittedly
-and, really, it goes without saying-if
the O.P.E.C. countries gave us' no alter-
native but to light or sink, we would
certainly fight.
"I just can't believe that they would
be that uncompromising." a vice-presi-
dent of Morgan Guaranty Trust with
considerable expertise in the Middle
East told me. "and that they would fail
to recognize the threat they would be
posing to the world economy. Because
they would certainly be running them-
selves into the ground. I mean, I don't
think they have a sort of suicidal urge
to bring everybody dawn-qyite the
contrary. I think the ch~nces? are good
that reason will prevail.'l.get the im-
pression- that the decision-makers on
both sides are pretty responsible, in the
final analysis. and realize that we are
interdependent. I'm not alarmed, in
other words, personally.
"Take the open letter to President
Ford from the president of Venezuela.
It's pretty verbose, if you like, but in
the middle of all that it's pretty con-
ciliatory. He's saying. 'We're willing to
work things out.' He didn't promise
anything, but he certainly didn't say,
you know, 'Forget it.' And I think his
letter is representative of most of the
thinking in O.P.E.C."
.There are, in all, thirteen members of
O.P.E.C., but the two most important
are Saudi Arabia and Iran:
Saudi Arabia has most of the world's
oil and is a traditional ally, staunchly
anti-Communist. We have 6,000 mili-
tary advisers in Saudi Arabia. ranging
from generals to master sergeants, and
we are building an air defense system
for them, which will be ready around
1978 or 1979. The Saudis have said they
want to lower the cost of oil. One rea-
son is to help us: the other reason is to
hurt Iran, whom the Saudis fear. Iran.
a ith 30 million people, a sophisticated
army, and the beginning of a powerful
economy, can use all the money its
economic expansion, where
oil revenue for the Saudis n
in. There. are two reasons w
dis have not pushed down
First, they are afraid of
populous and more militant
Second. King Faisal is a ve
man. "I think the religio
probably dominant," says a
the Federal Energy Admini
volted in international atfai
economics. You know, Ki
his life's goal at this stage.
some people think we are g
a renewal of the embargo
y the Sau~
the price
neighbors
y religion
s. thing i
official o
tration in
Faisal i
mmay b
hat's wh
ing to hag
ossible if
.
things don't progress politically
"I think Yamani [the oil minister
would genuinely like to to ver prices
He's more Western oriented [Harvar
Law, 1955-56], and he has better ap
preciation of the Iranian threat. Bu
the power, of course, is with the king
And he sees things more in terms o
Arab brotherhood."'
Iran is not an Arab country. Th
shah has visions (literally) of Iran'
becoming a major power, and to the
end. I'm told, either has n hand o
on order two destroyers from Litto
Industries. a couple of aircraft carrier
he is trying to lease,85OChi ftain tank
from Britain, 600 helicopters. about I I
Phantoms, 80 F-14's. ands forth an
so on'. In the words of on war buff
"This guy's building up a incredibt
military force."
}Vhich means if we eve wanted t
invade Iran. we had best waste no tim
whatever. However, it is unlikely w
would ever want to invade Iran. Ina
much as she. also, is a close ally an
staunchiv anti-Communist. lore like!),ran will in a few years (if of sooner
invade her unfriendly, Communi
neighbor to the west, Iraq (an oil pr
ducer of modest proportions), and the ,
while she's at it, perhaps knock o! F
Kuwait. too-perhaps spl sting thes
two prizes with Saudi Arabia, to kee
that country quiet. or eve going a t
the way and attempting t seize th
Saudi oil fields (which are onvenientl
in the eastern part of the country, o
the Gulf). plus Abu Dhabi. Oman. an
Qatar. That would leave ran, in t
words of novelist Paul Erdman. wh
has been working on all his for h
next book. "with (a) all the oil in t
world. (b) all the money i- the wort ,
and (c) the most important real esta
in the Middle East."
It is precisely the Saudi dependence
on us to keep such a thin from ha -
pening that should be our point of 1 -
verage in this situation-but so far t
hasn't done us much good.
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 Approved For Release 1999/09/02 : CIA-RDP79-01194A0001004G0001 _~HT
There is no question that the con-
suming countries are in a bind. The
New York Times has said. repeatedly.
that we "must take effective economic
action against the international oil car-
tel" jp force down the price of oil.
Unfortunately. there is no very effective
economic action we can take. A food
boycott would never work-the rela-
tively little food O.P.E.C. needs would
come from someone; perhaps even the
Russians. The Wall Street Journal is
not the only one to have called The
Times's proposal to limit the amount of
funds O.P.E.C.could invest in any one
consuming country "silly." And while
it is certainly vital for us to cut back
energy consumption and pull out all
stops in increasing production-this
may not be enough to force down oil
prices. About the only way to "force".
prices down is with what you might
call the ultimate antitrust action. Force.
But even that, if it were done half-
heartedly, could prove unsuccessful or,
disastrous. Less dramatic, but more
probable. perhaps, are the peaceful
ways in which the world-may muddle
through:
In the first place, there is the possi-
bility, simply, of compromise between
producers and consumers. Even if that
compromise is reached with the threat
of war lurking in the background. As
Walter Levy puts it: "Fundamentally,
you know, I take the position: you do
not produce oil sitting on bayonets. 1
don't know what youdo when you take
over a country by force. You have guer-
rilla movements, you have destruction
of facilities and all these kinds of prob-
lems. But who knows what happens
when people are desperate? I believe
the important thing from our side as
well as the producing side is to avoid
it. And the mere fact that certain things
may occur that make no sense what-
ever, but which would be extremely
destructive to us as well as the produc-
ing countries-that may be the means
through which agreement is achieved.
You know, the deterrent effect of, what
should I say, potentially irrational be-
havior. Which I would never advocate,
but it's there, the danger."
Second. there is the possibility of the
United States' guaranteeing Israel's pre-
1967 borders, both to protect Israel
from attack from without, and to pro-
tect her neighbors from attack from
within. Along with, presumably, some
compromise on Jerusalem. This might
mollify much of the Arab intransigence
on oil prices and production. It would
be an expensive and unpleasant posi-
tion to be put in. but less so than the
position we're currently in.
Third, there is the possibility that t e
cartel will simply fall apart, as cartels
have been known to do. So far this
one has proved surprisingly strong. But
if the world cuts back its oil demands
sharply. through conservation measures,
then the cartel would in turn have to
cut back its production (and revenues)
sharply in order to maintain the price.
And it is in allocating cutbacks that
cartels generally fail. Iran, for example,
might be unwilling to cut back very
much at all. Why then would Saudi
Arabia and Kuwait agree to cut back?
They have no interest in strengthening
Iran; and to Saudi Arabia, with oil re-
serves of perhaps 100 years. a barrel
not sold today is in effect put at the
end of the line and not sold for 100
years-which in current dollars makes
it virtually worthless. "This idea that a
barrel of oil in the ground is as valu-
able as a barrel in the bank is a lot of
crap." says Herman Kahn, of the Hud-
son Institute, who expects the price of
oil to decline steadily over the next
few years-even if, for face-saving rea-
sons, the price remains. constant while
world inflation gradually eats away at
the real price.
(Even if a program of stringent
energy conservation did not actually
force a price reduction from the cartel,
it would go a long way to solving the
problem, at least in this country. Ac-
cording to the Federal Energy Admin-
istration, for example, in 1972, the lat-
est year for which figures are available.
there. were 34 million "small" passen-
ger cars on the road, and 62 million
"standards," which includes everything
else. The small cars averaged just under
22 miles per gallon; the standards. just
over eleven. Simply by switching from.
standards to small cars-from Impalas
to Vegas-we would save 1.8 million
barrels of oil a day, give or take--or
about 30 per cent of our total imports.
And 30 per cent of the outflow of our
wealth into O.P.E.C. hands. Obviously
this switch cannot be made overnight.
But while it's happening, the same oil
could be saved by driving slower, driv-
ing smoother, and, as a last resort, actu-
ally-dare I say it?-driving less. Add-
ing similar energy savings from heat-
ing, air conditioning,lighting,and indus-
try, one can imagine that the "uncon-
scionable ransom" we are being forced
to pay for oil might be reduced to next
to nothing. This is why measures like a
really large excise tax on gasoline, the
proceeds of which could be returned in
the form of a tax credit to low- and
middle-income taxpayers, might be a
good idea.)
Fourth, there is some reason to think
own, we can the wit it. immer e
Vries, vice-president of the Morgan
bank, outlined this case persuasively on
September 23 at a conference in Beirut.
De Vries does not believe that actual
dollar accumulations will be anything
like the World Bank forecast, by which
O.P.E.C. member countries would build
up S650 billion in excess reserves by
1980 and $1.2 trillion by 1985; He as-
sumes that demand for O.P.E.C. oil
will grow more slowly than was pro-
jected when prices were one-fifth their
current.-level, whereas imports by the
O.P.E.C. countries from consuming
countries will rise very rapidly. He also
expects foreign aid from O.P.E.C. coun-
tries to the less-developed countries to
rise substantially. Under his assump-
tions, the O.P.E.C. reserve funds would
peak four or five years from now at
around 5300 billion, by which time
O.P.E.C. expenditures would equal rev-
enues. Huge as this figure is, de Vries
thinks it is not beyond the ability of
the .%urld financial system to handle.
If. in fact, the world can manage for
the next four or five years, then pros-
pects may improve substantially. By
then oil from the North Slope of Alaska
and from the North Sea should be flow-
ing (Britain hopes to be an exporter of
oil by 1980). and much of the explora-
tion that is going on now will undoubt-
edly be bearing fruit. Five years from
now we might also have made some
progress running our nuclear plants, or
even in exploiting in greater amounts
our 3.2 trillion tons of coal.
Such a mess. It's enough to make the
stock market go down and down, while
stock in Northrop. a defense contractor.
with a lot of Middle Eastern contracts,
hits new highs.
It is frustrating that our friends the
Arabs and the Venezuelans and the
Canadians. et al., seem so unsympathetic
to what we perceive as urgent global
problems; and frustrating that we con-
suming countries, with all our economic
power: can do relatively little about it.
And in frustration lie the seeds of ir-
rationality.
Nor do the Arabs make it easier for
us, to keep our heads when they say
they have raised o;1 prices to compen-
sate for the inflation of our exports.
and that if we lower our prices, they
dill consider lowering theirs. Number
one. oil prices have vastly outstripped
world prices as a whole. Number two.
the O.P.E.C. countries broke long-term
contracts and allowed consumers no
time whatever to adjust-which. when
the commodity is as indispensable as
oil and the screws are turned as tight
as they have been, would seem to qual-
ify as a highly hostile act. Number three.
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 Approved For Release 1999/09/02 : CIA-RDP79-01194AO00100460001-5
the O.P.E.C. countries export so much
more than they import that Western in-
flation does not even begin to justify
the 400 per cent hike in the price of
oil, We could give the Saudis free food
if they cut oil prices 5 per cent!
One hopes that out of the jawboning
and posturing and outrageous. demands
will come a good old-fashioned com-
promise. But it is almost as though we
were being baited. If and when Amer-
ica will lose its collective temper, how-
ever unjustified we might be. and how-
ever imperialistic or callous that might
make us look, is not an idle question.
And that it is not-that war could be
considered by serious people as a last
resort to our economic problems-is
almost enough to make you join a car
pool. a.
CPYRGHT
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 Page 39
~..?
Page 85
The Oil War of 1976: How the Shah Won the World
s 4
Music: Czech Mate
A Scenario by Paul Erdman
By Alan Rich
The end of the world-at least the one we all know
E f ,
The Met's revival of Jenufa only proves that sim-
and love-came during a week in early March, 1976.
plicity is not one of the company's strong points.
In a brilliantly executed two-day war, the shah of
Iran's military might swept its neighbors virtually
Page 87
off the map: Iraq first, followed by all the other
Theater: Posters, Posturings, and Potboilers
states and sheikdoms bordering the Persian Gulf.
By John Simon
This maneuver gave Iran control of nearly all the
The best and the worst of agitpron, not drama
world's oil supply, and it also gave the shah, of
course, the right to set a new price structure for all
that oil. The Industrial Era around the world ended
page 39
MISCELLANY
soon after:.
Fantastic" you say?Well, the story does rest in
Page 8.
the realm of fiction, so far:, a scenario concocted by
ft1+
The Bottom Line: An Iron Law of Capitalism
financier-novelist Paul Erdman- (whose previous nov-
D
-~ '
By Dan Dorfman -
Clients of U.S. Trust have been asked to put up more
els included The Billion
ollar Sure Thing and The
Silver Bears). But Mr. Erdman bases his fantasy en
money in a real estate deal they were led into. If
tirely upon facts that exist now and are easily aster-
they don't, they stand to lose all they've risked.
tainable: the present web of political associations
between Middle Eastern countries and the West, the
+
Page 10
The City Politic: Rocky and the Munchkins
concentration of military might currently at Iran's
By Richard Reeves
command, the centrality of that country in. the
world's present stockpile of fuel. Thus, everything
Oro,
Like it or not, Rocky is qualified to be vice-presi-
in Mr. Erdman's personal projection could happen
page 72
dent. But that's not the question. .
-and is indeed,. ready to happen.
Page 53
'
4
Page 63
l:
s Free in December
What
't
I Fall off the Mountain
By Susan Parker
By Shirley Maclaine
Holiday freebies to ward off heebie-jeebies. -
In an age filled with disaster, the demise of the
ABC-TV- series called "Shirley's World" may belong
fairly far down on the list. But for its star, Shirley
nptl 1
~(Q~l;1 11
Page 54
December A City Life-Guide
MacLaine, it was heartbreaking enough: In this ex-
if f~~`I! lli
By Ruth Gilbert .
cerpt .from her. forthcoming You Can Get There
i1,! i
From Nutcracker to Godfather II, from Ailey to Oz,
From-Here (a continuation of her memoirs that. be
'
,
our monthly pull-out calendar selects some Decem-
gan in Don
t Fall off the Mountain), she tells about..
".
ber highlights.
what happened when she became involved in TV-
page 78
" x .
land, what went wrong with the show, how she
Page 93
reacted when the first ratings came in, and how nice.
. o
The Insatiable Critic- I Lost It at the Baths
her acquaintances were not to talk about it.
e
By Gael Greene
_
After tasting-the boiled grass (or its equivalent) at
THE LIVELY ARTS
a Swiss diet spa, Ms. Greene has discovered a French-
74
-
P
one that is run with a taste for the tasteful. ? _ .
?3
age
Books: Rocky Times for Arlington
By Eliot Fremont-Sntith
wn
Page 15._ In and Around Town
From: all this moral outrage over Arlington Press
Page 72: Best Bets, By Ellen Stock
and its now-famous book about Arthur Goldberg,
you'd think that the. idea of publishing a subsidized
Page 92: New York Intelligencer
work-were something new.?Aw, come off it!
Page 76 .:_
page 85
Page York Classified
age 100:
Movies: Snap, Crackle, Pop
By Judith Crist
~, ..
- - - -
Page 106: New York Real Estate Classified
Mark Robson's Earthquake includes, among its many
pleasures, the destruction of Los Angeles.
Page 109: Sales & Bargains, By Sarah Harriman
Page 80
f
Page 110: Puzzle, By Richard Maltby Jr.
Art: It's a Small World
By Thomas B. Hess
Page 112: London Sunday Times Crossword
Tanguy . , . Mason ... Pistoletto: their work was
not of masterpiece caliber, perhaps, but it still gives
Cover: Hovercraft are coming in the oil war of 1976,
people pleasure, as three new shows prove.
page 93 by Julian Allen.
The following are registered trade names, and the use of these names is strictly prohibited: The rt u Lodger, Best Bets, Best its, the ottom Line,
The Capitol Letter. The City Politic. Cityscape, The Global Village, In and Around Tow
n, New York Intejligencer, The Passionate Shopper, and The
Urban Strategist. New York is published weekly (except for a combined issue the last tw
o weeks in December) by the NYM Corporation, 755 Second
Avenue, New York N.Y. 10017. Copyright C 1974 by the NY
M Corporation. All rights reserved. Reproduction without permission is strictly prohibited.
Tilton Glaser, Chairman; Clay S. Felker, President; Ruth
A. Bower, Executive Vice-President; John C..Thomas Jr., Vice-President, Marketing;
Kenneth Fadner. Vice-President, Finance; Thomas B. Morga
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For subscription information, write Joseph Oliver, New York Magazine, Subscription Department, Box 2979, Boulder, Colorado 80302.
Approved
 CPYRGHT
Approved For Release 1999/09/02 : CIA-RDP79-01194
account of exactly what happened in
1976, although these days nobody seems
to care, anymore. After all, sucl%thitlgs as
gasoline, automobiles, airplanes( wars,
the United States-they all belong to
the past. And good riddance. We
should let the past rest.
This is typical of the attitude of the
people who have survived here in Cali-
fornia. All they are interested in is till-
ing their fields, raisins their horses,
-drinking their wine. They have forgot-
ter; about the fate of most of the other
people on this earth during the pass
eight years.-. Well, I. am a historian of
.a sort (when I'm not a farmer), and I
-& not choose to forget. Because his-
_tory tells me that it can occur again.
All ir~Lvill take is the reappearance of
yet another powerful madman in our
midst.
History also shows us that the dan-
gerous ones are not difficult to identify:
and we must listen to them. Then, after
listening, we must act before they do.
In this reg.-:d, I must admit that I am
not terribiy optimistic. Because we al-
ways seem to behave like naive fools.
Until it is too late to act wisely.
Many people read Klein Kampf in
the 1930's. Yet almost all of them were
surprised when Hitler set out to con-
quer half the world and to kill off all
the Jews-doing. in other words, exact-
ly w'ha: he had already told everybody
he was going to do. How can this be
explained?
The most likely answer is that at the
beginning most people thought that
Hitler was just some kind of nut, and
not really to be taken seriously.
In 1974 William Simon, the secretary
of the treasury, spotted a new such
nut on the horizon. The new crazy was
His Imperial Majesty Mohammad Reza
Pahlavi Aryamehr, sometimes known as
the shahanshah of Iran. Specifically,
Mr. Simon was quoted by Time as de-
scribing the shah as "an irresponsible
and reckless ... nut."
Since Simon, at that time, was a cab-
inet officer of the United States o
of course promptly denied
that he ~h d ever thought, much less
said, any uch thing. Which was per-
fectly un erstandable, because Mr.
Simon, of rwise, might have had to go
back to hi old job in New York selling
bonds.
Why w uld a cautious man like Bill
Simon not say such a thing? Probably
because h was one of the few men in
high place in America who had been
keeping u with the sayings of the sha-
hanshah, f which there are many. One.
of the mast telling was a statement
made on. V television in early 1974:
"I think," said Mohammad Reza Pah-
lavi,. "that our country in the next ten
years will be what you [the British]
are today; and in the next 25 years, ac-
cording t other people, Iran will be
amongst t e five most prosperous coun-
tries in t e world. When you become
something like that, you start to act
according . that is, on a world
basis, wit out complexes, and under-
standing t e geopolitics of the world."
The sy ax was not too clear, but the
message rtainly was. When dictators
cast aside omplexes and start speculat-
ing public y about the geopolitics of the
world-I k out! The problem was
that only a few, like Mr. Simon, took
notice of the developing megalomania
of that Middle Eastern potentate.
Which, i retrospect, was a great pity.
If more p ople had taken the shah seri-
ously, we might well have been spared
the War of 1976. Because, of course,
the shah id not wait 25 or even five
years to tact to "act accordingly." He
was alrea y going full tilt with his war
preparati ns in 1974.
First, bought himself $1.1-billion
worth of uclear reactors from France;
not forte plutonium, but for the en-
ergy, he said, which seemed a bit pecu-
liar to so a observers at the time, since
if there as anything that Iran defi-
nitely di not need-holding, as it did,
the fours -largest known oil reserves in
the world it was more energy. Then, in
a great a t of generosity, he lent Britain
00010046000195 RGHT
nancially, and promised t at more
would be available if the need-arose.
And,' under the leadership of Harold
Wilson, of course that need arose. With
the result that Her Majesty' govern-
ment in London suddenly fo nd itself
in hock to His Majesty's g vernment
in Teheran. England, the protector of
the peace in the Middle East .for two
centuries, now suddenly fou d itself a
client state of Iran.
Then the shahanshah boug t 25 per
cent of that grand old company of the
Ruhr, Fried. Krupp Hiitte work. It
was only a matter of time before he
took over complete control. Old Hitler
buffs thought they had spot( d a. trend
developing, but nobody Paid 'attention
to them, even when the':s ah, in a
further act of generosity, offe d to bail
out a little company in the United States
that made the type of toys hat Reza
Pahlavi liked to play with-warplanes.
It seemed that, next to the Pentagon,
the shah was Grumman's largest cus-
tomer. It further seemed that he was
very worried about getting elivery of
80-odd F-14 interceptors on lime from
Grumman. Becausehe needed them for
the War of 1976.
As it turned out, he got them right
on schedule, plus 70 more Phantoms
from McDonnell Douglas, a umber of
which were equipped with nuclear
bomb racks.
Now he was in a positio to make
the Persian Gulf an Iranian lake, and
have the entire world at is mercy
thereafter. But first he had t convince
his big brother to the north, the Soviet
Union, that all this was a gr at idea-
and also attend to- a few other details.
That's why he went to Switzerland.
I
On February 13, 1976, the shah of
Iran arrived quietly in Zurich. As usual,
he moved into the Dolder rand Ho-
tel; it was close to the clinic where he
had his annual medical checkup. His
entourage was- not large: is young
wife, Farah Diba, their children, her
lady-in-waiting, his aide-de- amp, and
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 Approved For Release 1999/09/02 : CIA-RDP79-01194A000100460001-5
the shah's twelfth consecutive winter
visit to Switzerland.
On February 18, apparently in good
health, he and his family left by pri-
vate ,jet for St. Moritz. Just before
takeoff, two men, :who had arrived at
Kloten airport from Teheran just an
hour earlier, joined the flight. The shah
was at the controls of the jet most of
the way, but turned the plane over to
the Swiss pilot before landing. The shah
knew the small airport at Samedan: it
was squeezed between the mountains
behind Pontresina to the south and
,those of St. Moritz to the north, and
averaged 1.6 fatal crashes a year. Most
of the security men had gone on ahead
the day before in three Mercedes 600's.
All three were on the tarmac when the
Lear's engines were turned off.
About twenty minutes later, the shah's
party moved through the gates leading
onto the grounds of the Suvretta House
on the eastern outskirts of St. Moritz.
In this city, the nouveaux riches stayed.
at the Palace; those who inherited wealth
or title, or succeeded to both through
marriage, stayed at the Suvretta. The
shah, while still married to Soraya in
the 1950's, had learned to love skiing
in the Swiss Alps, and also to appreci-
ate the setting of this particular Swiss
hotel with its pine forests and the tower-
ing Piz Nair beyond. But he especially
enjoyed the solitude, beyond the rude
stares of German tourists with knap-
sacks full of leberwurst sandwiches and
sauergurken. In 1968 or 1969, the shah
had purchased, a villa on the grounds
of the Suvretta. It made things, easier
for the security men, and it added a
further dimension of privacy. Yet it
did not involve sacrificing the superb
service. and cuisine offered by one of
Europe's finest hostelries. The manager
of the Suvretta, Herr R. F. Mueller,
flanked by two assistants standing well
to his rear, was waiting outside the
main entrance to the hotel. The wel-
come was brief. The window at the
back of the first Mercedes was open
not more than one minute while the
pleasantries were exchanged. Then the
convoy of three limousines moved on.
Both the windows and the curtains
on the windows at the rear of the sec
. and limo. remained closed. The third
car was wide open, much to the dis-,
comfort of the shah's six bodyguards
inside, who were not used to the air of
the Engadin Valley in February, which
hovered around the freezing. level even
at noon.
iuncn, a y i:ju were out on e
small practice slope, about 75 meters
from the villa. Herr Mueller had dis-
creetly arranged that they have exclu-
sive use of the tow lift for the after-
noon. Two veteran ski guides were
there to assist. A good dozen security
men, half on skis, posted themselves
along the slope. The children, of courser,
protested the need for spending any
warm-up time on what the Swiss -term
an "idiot hill"; they preferred to move
right up to the main slopes of the Piz
Nair. But papa remained firm. At 3:30,
as the temperature began to dip radical-
ly and patches of ice started to appear,
everyone returned to the lodge. They
all had cheese fondue that evening.
Thus ended a typical day in the life
of His Imperial Majesty, the Shahan-
shah of Iran-devoted husband, duti-
ful father, sportsman. A day perfectly
set against the background of tranquil,
neutral, clean, moral Switzerland.
It was, in fact, the perfect place to
plan a war.
Which was exactly what the two men
who had remained so secluded in the
back seat of the second limousine had
been doing in the south wing of the
shah's villa, while the Pahlavi family
cavorted in the snow. They were Gen-
eral Mohammed Khatami, head of Iran's
air force, and Commander Fereydoun
Shahandeh, the Iranian air-sea strike
chief for the western part of the Per-
sian Gulf. As military men are prone
to do, one of their first acts upon set-
tling into their St. Moritz billet had
been to pin a huge-map to the wall. Its
dimensions were illuminating, stretch-
ing from India in the east to the Medi-
terranean in the west; from the south-
ern perimeters of Russia to the north
to as far south as Yemen and the Sudan. .
.. Both the general and the commander
had the appearance of happy men. And
why not? They controlled the biggest
and best-trained army in the Middle
East; the largest and most sophisticated
air force; a flexible, modern navy.
In addition, Iran possessed the
world's most extensive operational mili-
tary Hovercraft fleet (British-built SR.N-
6's and BH.7's), and an awesome arsenal
of missiles, ranging from the U.S.-built
Hawks to the British Rapier to the
Frgnch Crotale, but its most, danger-
ous weapon was;.of course, the Ameri-
can Phoenix stand-off missile-the laser-
guided smart bomb. To man all this
equipment, Iran had an army of 460,-
000 men (including reserves), reputed
to be the most efficient fighting force
in the Middle East (with the exception
The shah and his family had a brief
CPYRGHT
frig provided by over 1,000 American
military personnel who-were sent to
Iran in the early 1970's for that pur-
pose. (The total military hardware that
was at Iran's disposrl is shown.in the
inventory list on this page.)
All the Iranians lacked was a nuclear
capability. And they would even have
that, provided the shah pulled off his
final deal in St. Moritz. The penultimate
one had to be with the Russians. That
was scheduled for the following day.
Around 10 A.M. on the morning of
February 19, 1976, another limousine
came through the Maloja Pass, which
connects the Italian-speaking part of
Switzerland, Ticino, with the Engadin
Valley in the Grisons. This time it was
a Fiat, the driver an Italian;' and the
two passengers Russiansthe,'minister
of defense of the Soviet Union, Marshal
Andrei Grechko, and his interpreter.
The trip had originated in Turin,
where Grechko had been spending the
week as the guest of Fiat. The Russians
knew that the huge truck plant which
Fiat built in Togliattigrad in the early
1970's was also eminently suitable for
manufacturing. such items as tanks,
armored. personnel carriers, even air-
craft frames in a pinch. It required only
.a conversion job costing around a bil-
lion dollars, and a contractor that had
the know-how and the spare engineer-
ing capacity. Fiat had both, thanks to
the fact that for decades it had' been
one of the major suppliers of arms to
NATO, and the further fact that as a
result of Italy's disastrous economic sit-
uation, half of Fiat's capacity lay idle.
So Fiat had tendered a bid that at best
would cover - its overhead. The Rus-
sians knew this, and Grechko had been
fully prepared to sign the deal the very
first day in Turin. But Russians never
sign anything the first day. So the five-
day visit, This Thursday had been
scheduled as Grechko's day off, a day to
be spent privately, enjoying the unique
beauty of the Alps in winter.
At 11:15 the Fiat entered the grounds
of the Suvretta House. and headed di-
rectly for the shah's villa. The two Rus-
sians had barely emerged from the car
when General Khatami and Commander
Fereydoun Shahandeh appeared. Four
handshakes, a dozen words, and they
disappeared inside.
The shah was standing in front of
the fireplace in the library when they
entered. He extended a hand to each
Russian, and indicated that they would
be seated on the sofa behind a massive
wooden coffee table. He himself chose
an armchair on the opposite side. The
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 CPYRGHT Approved For Release 1999/09/02 : CIA-RDP79-01194A000100460069?YvRHT
two Iranian military men remained
standing to the shah's rear.
. "We shall speak English," were his
first words. Marshal Grechko nodded
his agreement. so the shahanshah con-
tin~t ed. "I do appreciate your agreeing
to this rather unusual arrangement. You
`understand that itwould have been
impossible for me to come to Moscow,
and very awkward to receive you in
Teheran."
"We fully understand, Your Majes-
ty," replied Grechko through his in-
terpreter, and both nodded their heads
slightly as the words were being re-
peated. Russians are as much in awe
of royalty as are Americans.
"The subject I wish to discuss is Iraq.
It is not the first time that that country
has come up in our talks over the years."
Silence from the sofa.
"You are, of course, aware that Iraq
has attacked Iran at least a dozen times
during the past five years. It is pre-
paring to attack again, this time on. a
massive scale."
Still silence. -
"We further believe that the Ameri-
cans will use this military conflict as an
excuse for intervention, in order-as
they so nicely put it=--to 'stabilize' the
Middle East."
"How?" asked Grechko through his
translator.
"There are 12,000 American military
'advisers' in Saudi Arabia. For years
they have been trying to convince
Faisal that Iran, not the United States,
is the real enemy of the Arab people.
And what better proof than a major
Iranian-Iraqi armed conflict? Now to
answer your question: the Saudi/Amer-
ican armed forces would move immedi.
ately to 'secure their northern flank.'
Which means their occupation of the
entire western coast of the Persian
Gulf, up to and including Kuwait. But,
all this can be prevented."
"How?" repeated Grechko.
"Very simply, though at great sacri-
fice to my country. Iran would make a
preemptive strike. Not just against Iraq.
We would simultaneously neutralize
Kuwait, Bahrain, Qatar, Abu Dhabi.
Dubai, as well as the northern tip of
Oman. We will have the entire Persian
Gulf-both sides-in our hands before
the Americans even find out. After that
they, and the:r friends the Saudis, will
be finished in the Middle East." The
shah paused, and then added six fur-
ther words:. "provided your country
does not intervene."
"We could not stand idly by," said
Grechko immediately. "Iraq is our
friend."
"But so is Iran. And it is I, only 1,
who can stop the Americans from gain-
ing contr0AWP6&8 For Relea:
Iran's Military Inventory, 19
Combat Aircraft
Type
F-14 Variable-geometry high-speed interceptor. World's
most advanced combat aircraft. Supplied by
U.S.A.. (Grumman). 8tf
F-4 The Phantom (McDonnell Douglas) is, next to
the F-14, the U.S.A.'s best missile-armed aircraft,
with nuclear capability as a long-range, all-weather
fighter-bomber. _ "1170 -
F-5. Supplied by Northrop. A highly maneuverable
fighter aircraft, carrying highly sophisticated elec-
. tronic equipment. Ordnance capability: 3.5 tons. 221
RT-33 Another. American product. Used for tactical
Helicopters
UH-1H214A Carries 16 armed personnel; cruise speed, 150
m.p.h.; gross weight, 13,000 pounds. Very success-
ful as attack helicopter in Vietnam.
AH-I J The "Sea Cobra," which started to come off
American assembly lines in 1974, is noted as
"the world's only fully integrated helicopter gun-
ship with a stabilized multisensor fire-control
system for day and night delivery of weapons."
The U.S. Army will not have any until 1978.
Other Including AB-206A's, CH-47C's, AB-212's, Huskies,
and Whirlwinds.
TOTAL
Tanks
M-47 American workhorse-type tank, with a reputation
for mechanical reliability and good mobility. Has
90-mm gun, speed, of 35 m.p.h.
M-60 The main battle tank of the U.S. Army, with
105-mm high-velocity gun; speed of 30 m.p.h. It
can cross water up to 13 feet in depth, has night-
vision equipment.
Chieftain World's most modern battle tank, supplied by
Great Britain. Has an - exceptionally accurate
120-mm gun which can hit and destroy any tank
within 2,000"meters. Speed, 30 m.p.h.; night vision
250 (est.)
739.
460
equipped; With.snorkel, can wade'up to 16 feet. 800
TOTAL'
Armored Personnel Carriers
BTR-60
Soviet-built. Carries 13 infantrymen. Speed,
50
.m.p.h. Has a 14.5-mm heavy machine gun and a
7.62-mm machine gun, turret mounted. Equipped
with rocket launchers (including antitank).
BTR-50
Soviet-built light amphibious tank. Carries
15
men plus 4 machine guns of 14.5, 12.7, or 7.62-
mm caliber.
M-113 U.S.-built standard current U.S. Army armored
personnel carrier. Carries 13 men, has .50-caliber
machine guns. Variants include mountings for
1,000
 Type
Air' Force has been on alert since last
Characteristics Number Wednesday. The army reserves were
ll
h
f
Naval Vessels
Aircraft . Kitty Hawk and Constellation, on lease from the
Caariers" United States. Both are 1,062 meters long, can
. carry 80-90 Phantom fighter-bombers.
Destroyers Two are of the Spruance class, supplied by Litton
Industries, Pascagula, Mississippi. World's most
sophisticated attack ship, with helicopter, missile,
and antisubmarine capability.
Frigates
Corvettes 4
Patrol Boats 14
Minesweepers 4
Other Including landing craft, inshore minesweepers, etc. 6
TOTAL
"There are other reasons," continued
the shahanshah. "For example, wou:d
it be in your interest if we' were forced
to suspend shipments of natural gas to
your country, especially now that the
second pipeline is in operation?"
"Why should you have to do that?
We have very firm agreements!" Grech-
ko was getting angry.
"Because," replied the shah, calmly,
"if we allow Iraq to attack, its first
target on Iranian soil will be Abadan.
The refinery complex there is the larg-
est in the world, and Iran's prime
source of energy. It's within artillery
range of Iraq. But our gas fields are
beyond Iraq's reach. I think it should
be obvious that after Abadan is de-
stroyed, we will have to immediately
stop all exports of gas. We will des-
perately require every cubic foot for
domestic consumption."
The shah raised both hands in a
gesture of impatience.
"But why should I dwell on circum-
stances which need not ever develop?
With the agreement of your govern-
ment, I can prevent such a catastrophe.
Then not only will you have your gas,
but much more. I will be prepared to
enter ? into a five-year agreement on
shipments of crude oil to the Soviet
Union-at a fixed price. Ten dollars
a barrel. Up to half a billion barrels
a year."
"It is too dangerous," said Grechko.
"I. am also in a position to lend you
an F-14. Or two, if you need them."
Now Grechko's eyes flickered. The
American F-14 was the only aircraft
superior to the MiG-25, and both planes
were planned as the top-performance
interceptors of their respective countries
"How soon do you need an answer?"
"Within three days."
"And if it is negative?"
"Then you had better find your own
way of coping with the Americans."
The shahanshah rose. The audience
was over. But Grechko, though also
rising, persisted. "How do you know
the Iraqis are about to attack?"
The shah's hand motioned to General
Khatami. Out of his briefcase came two
aerial photographs, compliments of a
camera built by Kodak, as mounted in
an aircraft built by McDonnell Douglas
-a total package for which the shah
had paid $15 million in 1974.
"This," said Khatami, taking the first
photograph and pointing at the river
forming the border between Iraq and
Iran where the two countries meet at
the northern tip of the Persian Gulf,
"is the Shatt al-Arab River.. Note the
incredible concentration of artillery dis-
placements and missile launching sites
here, opposite Abadan, and there,.vis-a-
vis Khorramshahr."
Khatami presented his second photo.
"Now this is th,. territory immediately
to the north-the narrow plain between
the Tigris and the Iranian border. You
can quite clearly see the armor. Here,
ready to move on Ahvaz. There, poised
at Dezful. The. idea, obviously, is to
sweep east and then south to secure
Abadan and its surrounding oil fields."
He put the photographs aside. "All
in all we have counted about 1,700
tanks in that corridor east of the Tigris
-800 T-55's, 450 ,M-60's, and around
500 BTR-152's. They represent 90 per
cent of the total tank force Iraq pos-
sesses. This type of concentration has
never occurred before. At least half of
recalled last Monday. A
t
is is, o
course, quite easy for you to verify."
The marshal spoke: "I shall be
leaving Italy fur Moscow tomorrow
afternoon. You will hear from us im-
mediately thereafter."
Grechko bowed, turned, and left.
Minutes later the shah walked out of
the chalet with his wife and children,
It was a perfect day for skiing.
II The French began arrivingat nine the
following morning, in black Citroens,
of course. The first group was from the
Dassault-Breguet Aviation Company,
the largest French aircraft producer.
The subject under discussion: the Mi-
rage F 1's. In fact, 120 of them. In addi-
tion to the aircraft, the package Dassault
hoped to sell included 1,500 Matra
R.530 missiles (some with radar, and
others with infrared homing heads), as
well as 500 of the new French laser-
guided stand-off weapon (its character-
istics being very similar to the-Ameri-
can Phoenix), which tested out with a
better than 95 per cent hit rate even on
targets as small as single armored vehi-
cles, or parked aircraft. If accepted,
this deal would have major long-term
consequences for France. It, not the
United States or Russia, would become
the chief supplier of arms to the biggest
single customer for weapons that had
ever existed-the shahanshah. The
French asking price for this initial
package was $5.1 billion. They pro-
posed that 50 per cent be paid on sign-
ing, the other half on delivery. The
shah, in the preliminary discussion ear-
lier that year, had indicated he would
prefer another mode of payment. For
the shah was very cash-flow-conscious
(his cash was earning him 15 per cent
per annum at Chase Manhattan in Lon-
don). He preferred to pay in kind.
.And kind, in Iran, means crude oil.
This was the reason for.the second
delegation, which arrived at a little
past ten, only minutes after the Dassault
presentation, flip charts and all, had
been completed. The second group was
typical of French negotiation teams in
that it included a mix of both private
and governmental interests-in this case,
the heads of the Commissariat au Plan,
the French National Energy Office, the
Compagnie Nationale Francaise de Pe-
trole, and Gaz de France. The deal being
offered them? Seven billion barrels of
Iranian crude, over seven years, at a
base price of $11.50 a barrel, to rise
at the rate onl
of 5
6
er cent
er
y
. p
p
in the 1980's. That Grechko under- the Iraqi forces have always been kept
stood. Let the back in, the Krem- in the north, to contain and destroy annum for the he length of the contract.
people No s t offer to the Rus-
Iin calctApp rO do O* Release 1 9t9911fl91O2urtOIAQR[ R79iO119i4A00O1g APAr1 n n didn't know that.
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 The second stag of the French-Iran-
Ian conference was brief. The French
accepted, without reservation, the shah's
proposal. They were prepared to sign
on the spor. But the shah was not. All
depended on the outcome of yet a
further meeting. But he merely, told both
the oil and arms men that his final de-
cision would be. given the following
Monday. It would be communicated to
them by his ambassador in Paris. They
could now leave. So they left.
It was only after the grounds of the'
Suvretta had been completely cleared
of black Citroens that the final delega-
tion arrived. They came in an Alouette
military helicopter provided courtesy
of the Swiss government,. which had
also guaranteed the complete secrecy of
the operation.
This final meeting involved only five
men: the shah, his two military advis-
ers, the personal delegate of Premier
Giscard d'Estaing, and the chief of
staff of the French military forces. The
shah wasted no time in making his pro-
posal, which, he said, required only a
otri or a non.
.He wanted to borrow a half-dozen
atomic bombs from France. He would
return them on December 31, 1976.
"Why this particular date?" asked
Giscard's right-hand man.
"Because by then we will have built
some of our own," replied the king
of kings.
The problem was that he, the sha-
hanshab, was under dire. threat of-nu-
clear blackmail right now, in February
of 1916, and he could hardly counter
such a threat with bombs. that he would
not have until the end of the year.
Thus the need for this short-term loan.
Were there any possible circumstances
under which the French bombs might
be used?
Of course not! You could not fight
and win a nuclear war with only six
bombs! He needed them only to be able
to "honestly" counter a probable Iraqi-
Soviet nuclear bluff. If he could not,
the chances were very high indeed that
Iran would become yet another satel-
lite within the Soviet orbit. Such was
obviously not in France's interest, espe-
cially now when Iran was about to
develop into France's largest single ex-
port market on the one hand, while
guaranteeing France's future petroleum
supply on the ot!-.~.r. N'est-ce pas?
The two Frenchmen demurred from
offering any opinion whatsoever. But
they did guarantee that the shah's
thoughts would be communicated to
Paris forthwith. This time it was the
shah's guests who rose first. You must
grant the French at least one thing:
they understand upmanship.
So by noon of that Friday, February
20, the shah was once again alone with
his generals. But by.this point he had
had enough of them. He'd also had
enough of skiing. So he dismissed his
military aides, ignored his family,
strolled out of the chalet, and disap-
peared into the north wing of the
Suvretta House.
He always reserved 40 rooms there
during his sojourns in St. Moritz for
his entourage-security men, communi-
cations people,. hangers-on. It also
served, rumor had it, as the shah's in-
door-winter-sports center. More specifi-
cally, it was suggested that the shah
had an ongoing penchant for dark-
haired German girls, along Soraya lines,
and that he maintained a fairly sizable
stable of such in the north wing. And
why not? The Old Testament is full
of emperors and kings who did the
same thing: Solomon, David, Ahasue-
rus, to name but a few. And the shah
was a great believer in tradition-in
the obligation of tradition.
Thus it was that the shah only
emerged once again into the daylight
around 2 P.m. that Sunday. He returned
to the chalet just in time to receive two
messages: a da from Moscow, a oui
from Paris.
Now he could return to Teheran and
start his war.
III
The Two-Day War began at 6:30
A.M. on Sunday, February 29, 1976.
The shah's astrologer had approved of
this 'date, and his court historians had
concurred. No ruler, to their kaowl
.edge, had ever chosen an intercal.ary
day to begin a war. And it was the re-
establishment of an empire-the ancient
Sassanid Empire-that was at stake.
The. king of kings was 56, and before
he died he intended that the glory. of
ancient Persia be restored.
His first move was right out of the
Israeli book: 100 Phantoms, equipped
with their Phoenix stand-off missiles,
made low-level dawn raids on all eight
major Iraqi military bases. Iraq at
this time had 30 MiG-23's, 90 MiG-21's,
30 MIiG-17's, and 36 did British-made
Hunters. All but 33 of these aircraft
were destroyed on the ground before
the sun was up, thanks to the remark-
able accuracy of the Phoenixes and to
the skill of the' Iranian pilots, all of
1,hom had been schooled by the United
States Air Force.
The second air strike was directed
at Umm Qasr, the port city just off
the Iraqi-Kuwait border, where the
Russians had built a naval base for
the Iraqis, designed to guard the mouth
of the Shatt al-Arab River. One hun-
dred and twPnry Nnrr},rrir, F_av, 1e.0?l.,a
CPYRGHT
the place within an hour. By ,:30 A.M.
battalion after battalion o Iranian
troops were being landed by helicopter.
It was a walkover.
The third.strike, in which both Phan-
toms and F-S's were employe , was the
most massive of all. It was d rected at
the artillery and missile sites just across
the. Shatt al-Arab from Ab dan and
Khorramshahr. A great deal of napalm
was used-with devastating effect.
The Iranian Air Force had proved
itself the most efficient in the entire
Middle East, exceeding even the Israeli
performance of a few years back in
terms of turnaround time and opera-
tional techniques.
The key tactical move, however, first
began around 9 A.M. after all three
air-strike operations had pr ved suc-
cessful. Military historians today refer
to it as "the Shatt al-Arab end run."
It was conceived and implemented by
Commander Fereydoun Shah ndeh as
the first major military offensive based
primarily upon the use of Hovercraft.
The idea was tailor-made for he geog-
raphy of the area. Remember all those
Iraqi tanks in the corridor bet een the
Tigris River and the Iranian border?
Well, behind them-to the west-were
the swamps of the Tigris-Euphrates
delta, impassable terrain from the mili-
tary standpoint. Impassable, that is,
for every military vehicle own to
man except the Hovercraf , which
could move on top of its air cushion
across anything that was reasonably
flat-water, swamp, or beach and at
a sped of 40 m.p.h., fully loaded. These
remarkable machines (all butt for the
shah in Britain, the world's leader in
.Hovercraft technology) could move an
entire armored battalion: in t eir cav-
ernous bowels were tanks (C ieftains,
also British-built) and armored person-
nel carriers (BTR-50's and BT -60's, of
Soviet origin) plus a full complement of
military personnel in the wing and on
the upper decks. They had a range of
150 miles. But they could not move until
the naval base at Umm Qasr ad been
put out of action, and until he Iraqi
fire power on the west ban of the
Shatt al-Arab-the gateway to the
Tigris-Euphrates delta-had Seen elimi-
nated. By 9 A.M. it was. Immediately,
the beaches on the Persian Gulf to
the east of Abadan were filled with the
howl of Hovercraft engines, a the air
pressure was raised within the skirts
beneath the vehicles. By 9:1 all 45
craft were under way. As these gro-
tesque weapons of war moved - around
the corner, and up the Shatt al-Arab
channel, the scene resembled a Martian
invasion.
Only two hours later, they began
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 CPYRGHT
to the rear of the Iraqi forces. At the c lent state o fhe entagon's. at the islands of
-same time the main body of Iranian was good for the shah was therefore Abu Musa and Greater and Lesser
panzers, which had been grouped be- good for America. Tanb, they had very little left to do. tween Dezful and Ahvaz, began a fron. James Schlesinger endorsed this state- In Oman no invasion was necessary.
tel assault from the east. It was nothing men- "without any reservations what Starting in 1972, the shah had gener-
less .than a massacre. Already by early soever." It was totally consistent with ously provided the Omani government
afteioon the vast majority of the Iraqi American policy as initiated by John- with military assistance to help it coun-
forces chose surrender. son in 1968, and continued-by the Nix- ter the Dhofar rebels in the strategic
on and Ford administrations ever since.. northern tip of Oman, situated between
Kissinger, biting his fingernails more the Persian Gulf and the Gulf of Oman.
Meanwhile, back in Washington, than usual, remained silent. Simon also By 1976, Iran had 2,000 paratroopers
Secretary of Defense Schlesinger and said nothing, but seemed to have an "I and 60 helicopters in that region. In
his chairman of the Joint Chiefs of told you so" look on his 'face. Only addition, the majority of the Omani
Staff, General Brown, were having Rockefeller dissented: "I don't like this army there were Baluchis, recruited for
drinks at a cocktail party, in Chevy one damn bit." (Was Standard Oil tell- . the most part from southern Iran. The
Chase, being thrown by Senator Stennis ing Rockv more than it was telling the paratroopers and Baluchis simply got
of Mississippi in honor of himself. Pentagon?) together and ran up the Iranian flag.
The first hint that something was At this juncture, Henry, of course, While all this was happening on the
going on started coming in around 8 began to tilt in the direction of Rocke- ground, a major redeployment of Iran-
P.M. Eastern Standard Time, on this feller. "Nor do I," he stated, firmly, ian air and sea forces was taking place.
29th of February. The word came from Then the president's phone rang. Ap- It involved' a massive shift of equip.
the Aramco communications center in parently some new action had started ment to the new naval/air bases at
Riyadh, was sent to the Standard Oil on the gulf. The C.I.A. would have a Bandar Abbas (guarding the mouth of
people in New York, and then relayed full report later. Jerry. Ford actually- the Persian Gulf from the west coast to the Pentagon. Since it was a week- looked relieved after he hung up'.He of Iran) and especially to Chah Bahar
end, they sat on it there for a while, had hardly wanted to take ,ides'against on the Iranian coast, just west of the
and then' some colonel decided that his friends in the Pentagon; but%he also Pakistani border. Chah Bahar was by
he'd better cover his back just in case. could not afford to buck Rockefeller- far the largest military base anywhere
So Schlesinger was alerted by tele- Kissinger. So he said: "Gentlemen, we in the Indian Ocean. It was
phone out at Chevy Chase. need a lot more information about the American contractors in early
"Goddamned Iraqis," was Schlesin- situation over there before we can de- 1970's, at a cost of $1 billion.
tide. anything. Let's meet again first By nightfall of March 1, 1976, Iran
ger's comment to Brown after hanging thing tomorrQw morning. In the mean- controlled the entire Persian Gulf. The
up, "they've attacked Iran again. But time, I want all of you to get every- Two Day War. was over. Now Iran's
this time in real style, apparently." thing you can on what's going on." forces were poised around. the mouth
Brown did not trust either the de- of the Gulf in anticipation of a chal-
fense secretary or Standard Oil, so he Q lenge from the United States.
immediately arranged for an aerial re- Actually, quite a bit was going on. When the six men reconvened in the
Schlesinger sweep the region. At 6 A:M.. on March 1, Middle Eastern White House early on March 2, it was
Schleger thought he'd better call time (which was eight time zones ahead Bill Simon who pointed out the enor-
Henry. Nancy answered the phone and of Washington) , the Iranian takeover mous gravity of the situation. The
said Henry was at the office. So of Kuwait, Bahrain, Qatar, Abu Dhabi, shah, he said, now controlled all the
Schlesinger called the State Department. Dubai, and Oman began. oil in the Middle East, except for that
"You have a problem, James?" It. The Kuwaiti operation was simple. of Saudi Arabia. And there was little
was pronounced "Chames." The Iranian forces, which now com- doubt in his mind that the shah could
"Yes, Henry. Apparently Iraq has at- pletely controlled the entire southeast- now grab the Ghawani oil fields (from
tacked Iran. And this time the shah is ern corner of Iraq, simply turned south. which Saudi Arabia got 90 per cent of
shooting back." By noon Kuwait's 3,000-man army its crude-oil output).
"We have nothing on this at State."
surrendered. The next place to go was "Okay," said Ford, "how do we
-"It. does not surprise me." Bahrain. For years, the large and pow- respond, General Brown?"
Henry did not think. that deserved erful Iranian minority in Bahrain had General Brown frowned. "Sir, what
comment. "When will you have more?" been demanding Anschluss with the exactly did you have in mind?"
Kissinger asked. mother country0On this March 1, the "The marines, the navy. I don't care.
"Within the hour." local Iranians-who in the meantime I just want the shah to.pull back. All
At the end of that hour, Schlesinger had been molded together in a well- the way. And right away."
and Brown were on their way to the organized and superbly armed para- "Uh, that's going to be 'a bit difficult.
White House. Henry, William Simon, military force-took the country over. I mean, doing it right away."
and Nelson Rockefeller were in the No more than 100 shots were fired. "What do you mean?"
Oval Office with the president when The takeover of Qatar, Abu Dhabi, "Well actually, sir, we've got nothing
they arrived. All were drinking hour- and Dubai involved a combination of in that area. Our closest strike force
bon and branch water, so Schlesinger betrayal from within and invasion from would be the Sixth Fleet, I guess. But
and Brown also drank bourbon. the sea. In all three sheikdoms there that's in the Mediterranean, of course.
Mr. Ford asked the chairman of the were lang.- numbers of Iranian immi- And the Seventh Fleet's off Formosa
Joint Chiefs of Staff to brief the group. grants who had brought with them the right now. If we moved either one, it
Brown told of the air strikes skill_ and work ethic necessary for the would be about a week before we'd be
Baghdad, of the destruction n of around
ready to hit the Gulf. But even then
Soviet-built naval base at Umm Qasr, building of a modern economy-attri- y
butes which the local Arab population I'm not sure we would want to do it."
and of the Shaft al-Arab end run. He "Why not, for Christ's sake?"
lacked. These immigrants, who had y
did not consider these developments "Well, the shah has an enormous
unfavorable for the United States. been organized along Bahrainian lines,
o u d the strategic militar+ points amount of fire power ready to go against
Quite the c
se 1aQg/Qti2 inCtlffl-R?11 ;9 1r94A@?( b?4600?4 carriers cruising
 CPYRGHT
Approved For Release 1999/09/02 : CIA-RDP79-01194A000100460001-5
area through nuclear ac mai . For-
the Constellation. They've each got 90 tunately Iran possesses a quite ade-
Phantoms on board. Then there's Char quate nuclear capability, thanks to the
Bahar proper. He's got 80 F-14's there help of his two best friends: the French,
-=more than we have in all of Europe. who helped him get the bombs, and
And take those missile sites on Abu America, which has provided him such
Musa. Assuming we could get into the efficient delivery systems. He sends his
Guff, I'm not sure we'd get past them." best regards to you, Mr. President."
"You mean to tell me that we, the "He'd never use them against us even
United States of America, cannot take if he really had them," stated Schlesin-
on Ford. the shah militarily?" thundered ger.
"What do you think, Henry?" asked
"Well, we could. But our casualty Ford.
rate would be astronomic. And then "I don't know him well enough. But
there's something else to think about. I do know somebody who does."
In order to pet the shah back out of "Who?"
of landing on the scale of Normandy in the Gulf, we'd have to mobilize a type "Bill Rogers. Right after he resigned
World W II. With the exception as secretary of state, he went to work
War
that our supply lines would not be fif- for the Pahlavi Foundation."
"Call him."
teen miles across the English Channel
but about 5,000 miles, from Western g So Henry did. Rogers's answer was
slow to come, prudently worded, but
Europe. I'm not sure that course of
quite clear: the shah probably had nu-
action is to be recommended. "
clear weapons, and if he was threat-
"What course of action is?" by B-52's and the Sixth. Fleet, he'd
probabl have to go nuclear."
"We'd y a use them as a last resort. There was a
One of the resident's aides enter
p ed carefully couched suggestion that an
e? Oval Office at this point, aid Kissin
element of irrationality in the shah's
handed
a
"I , A Henry g character should not be ignored.
note. t s rdeshir Zahedi," said Kissin-
ger. When Henry had finished, somebody
" muttered: "We should have given that
Who?" asked Ford.
bastard the Allende treatment years
Iranian ambassador. He wan
to talk to me." "The is ago." But nobody heard it.
Three hours later a message was on
the phone?"
"On the way to the shahanshah of Iran
"Yes ." from the president of the United States.
" from the president of the United States.
"Well, talk to him." It expressed the hope that Iran and
Henry left the room. While he was
America would work as partners to-
gone, General Brown ex p that
p , in ward peace in the Middle East in the
his judgment, it would be best to us
B use
future, as they had in the past.
-52's from Guam for the "ob. The
Europeans would job. next day the shah issued a state-
state-
if any nuclear attaget upset, he ck force based on ment. In it he explained that the libera-
h tion of his fellow Moslems on the
t etr territory was used to bluff the
hah Persian Gulf had involved tremendous
s ; Of course, he went on to explain,
the threat of such weaponry would not financial sacrifices. The Iranian people
ty had a right to just compensation. He.
b
any means preclude the necessity of
y went on to state that it was his inten-
occupying the Gulf with American
tion not only to reconstruct the war-
troops. Which would require a major
ravaged areas, but to make them mod
naval operation, and, as he had already 0
tad out d b els of the advanced civilization that
porn, considerable risk. On the
other hand, Iran offered the world.
since the shah had no
This would all cost money. There-
.means of nuclear retaliation. no doubt
fore, as of March 3, 1976, the price of
would just give up the moment the
he Persian Gulf oil would double. appeared over Iran. The 's - That did it.
' Henry ca= b.ack in, looking a
bit pale.. 4 Within two months Italy and Britain
"Our were bankrupt. The dollar had col-
Iranian friend called just to
lapsed, +m the lapsed, along with a few thousand
pass along a little message fro
banks. Wall Street lay in ruins. And
shah. He wants to assure us that he
semains-a staunch friend of the United these were only the first dominoes to
States d fall. The Crash of '76 was inevitably
, and can now insure stability in
followed by the Revolution of 1977
the Middle East, ,
an objective which, he
says, our two nations have been the Famine of 1978, the Collapse of
jointly pursuing during the past decade. He Society in 1979 ..'. and ultimately, the
End of the Industrial Era.
added a P.S.," continued Kissin er. "He
g Todav, in 1984, most survivors say
to calm any fears we might have
wants g that it has all been for the good. At concerning
a possible attempt by the S t Union least the ones here in California who
ovte to take advanta
e of th
g
e
freezing to death. I'm not sure. Some-
times I like to stop and think back on
the old world-but, rig t now, the
cows need milking. -
situation by trgi ` RAtP I IPacP AAATA 9n o : i?_ 2 } i1'i'I AdAnnn'I nndRnnn'I -5