Oil wealth

Oil wealth
Between 1953 and 1964, King Saud re-organized the government of the monarchy his father, Ibn Saud, had created. Saudi Arabia's new ministries included Communication (1953) Agriculture and Water (1953), Petroleum (1960), Pilgrimage and Islamic Endowments (1960), Labour and Social Affairs (1962) and Information (1963). He also put Talal, one of his many younger brothers (by 29 years his younger) in charge of the Ministry of Transport.

In 1958-59, Talal proposed the formation of a National Council. As he proposed it, it would have been a consultative body, not a legislature. Still, he thought of it as a first step toward broader popular participation in the government. Talal presented this proposal to the king when the Crown Prince was out of the country. Saud simply forwarded the proposal to the ulama asking them whether a National Council was a legitimate institution in Islam. The idea seems to have died in committee, so to speak. It would be revived more than three decades later. A Consultative Council came into existence in 1992.

Meantime, the Organization of Petroleum Exporting Countries came into existence in 1960. For the first decade or more of its existence, it was ineffectual in terms of increasing revenue for member nations. But it would have its day. Tension between Faisal and Saud continued to mount until a final showdown in 1964. Saud threatened to mobilize the Royal Guard against Faisal and Faisal threatened to mobilize the National Guard against Saud. It was Saud who blinked, abdicating and leaving for Cairo, then Greece, where he would die in 1969. Faisal then became King.

The 1967 war had other effects. It effectively closed the Suez canal, it may have contributed to the revolution in Libya that put Muammar al-Gaddafi in power, and it led in May 1970 to the closure of the "tapline" from Saudi Arabia through Syria to Lebanon. These developments had the effect of increasing the importance of petroleum in Libya, which is a conveniently short (and canal-free) shipping distance from Europe.

In 1970, it was Occidental Petroleum which constituted the first crack in the wall of oil company solidarity in dealing with the oil producing nations; specifically, in this case, with the demands for price increases from the new Qaddafi government.

In October 1973, another war between Israel and its Muslim neighbors, known as the Yom Kippur War, got underway just as oil company executives were heading to Vienna, site of a planned meeting with OPEC leaders. OPEC had been emboldened by the success of Libya's demands anyway, and the war strengthened the unity of their new demands.

The Arab defeats in the Six Day and 1973 Arab-Israeli wars triggered the 1973 oil crisis. In response to the emergency re-supply effort by the West that enabled Israel to defeat Egyptian and Syrian forces, the Arab world imposed the 1973 oil embargo against the United States and Western Europe. Faisal agreed that Saudi Arabia would use some of its oil wealth to finance the "front-line states," those that bordered Israel, in their struggle.

The centrality of petroleum, the Arab-Israeli Conflict and political and economic instability and uncertainty remain constant features of the politics of the region