The Promised Land

Palestine really was the Promised Land. So much so that it was promised to three different groups within a couple of years.[1] The promises were made by British imperialism, a real world power, not by an imaginary deity in a book of very dubious provenance. What made the promises remarkable was that they were about a land which, at the time, the British neither possessed nor controlled. But imperial arrogance was a commodity in ample supply when the promises were made, and it has not become scarce in the years since.

Map of Ottoman Palestine, 1878 (Source: www.passia.org/maps/view/2)

Balfour Declaration

The most famous promise, the one most widely known, almost to the exclusion of the others, was to ‘the Jewish people’. Issued by the British Foreign Secretary, Arthur Balfour, in the Balfour Declaration of November 1917, it read:

“His Majesty's government view with favour the establishment in Palestine of a national home for the Jewish people, and will use their best endeavours to facilitate the achievement of this object, it being clearly understood that nothing shall be done which may prejudice the civil and religious rights of existing non-Jewish communities in Palestine, or the rights and political status enjoyed by Jews in any other country.”

While something short of an outright promise, if a major imperialist power was willing to use its ‘best endeavours’ that was good enough for the Zionist lobbyists, after they had failed to make much ground with the Ottoman Empire or with Germany. In particular, they could ignore the annoying bit about not prejudicing the ‘civil and religious rights of existing non-Jewish communities in Palestine’ and be hopeful that their ethno-religious racism would eventually win the day. Neither were Zionist leaders very concerned about Jewish people being denied rights or status elsewhere as a result, since surely that would only add to the supply of the right kind of immigrant into Palestine.

Furthermore, it looked to them like a step up from British East Africa! After meeting with British Colonial Secretary Joseph Chamberlain in 1903, Theodor Herzl, the founder of modern political Zionism, had been offered an area of land in what was later Kenya as a refuge for those fleeing from pogroms in Eastern Europe. Herzl raised this option at the 1903 Zionist Congress in Basel, but, following protests from Russian Zionists and Herzl’s death in 1904, nothing further came of this so-called ‘Uganda’ Scheme.

Balfour’s brief letter should also be put in context. He already had form as having an ambiguous view on Jewish people. For example, while being opposed to Russian persecution of Jews, he was strongly in favour of the 1905 Aliens Act, Britain’s first immigration controls. The 1905 Act was focused on stopping Jewish refugees coming to Britain, and many British politicians, encouraged by Zionists, also came to see Palestine as a useful place to send the unwanted Jewish immigrants.

There were several other strands in the British political class that led up to the 1917 Declaration.

Some British politicians were Jewish themselves, and were worried that setting up a ‘Jewish homeland’ would raise questions about their British nationality. The final part of the Declaration about ‘Jews in any other country’ comes from this concern. Some were evangelical Christians who, while often also anti-Semitic, saw Jewish settlement in Palestine as part of God’s plan, and a step on the road to salvation, just as the British Empire was in its own divine manner bringing justice and order to the world. Some saw it as useful to have a grateful group of people loyal to Britain settling in what would be a strategic area as the Ottoman Empire was waiting to be carved up.

Many were also influenced by the anti-Semitic ideas of the time, in particular the notion that Jewish financiers had immense power and influence. So the Declaration might be a sensible policy for gaining important friends. Naturally, the Zionist leaders discussing with British politicians talked up this ‘Jewish power’. To complete the factors leading up to the Declaration it is worth noting too that by 1917, with the First World War proving very costly in lives and treasure, British politicians cast an eye on the apparent influence of the Zionist lobby in America. They saw the Balfour Declaration as a way of gaining further American support.

The Hussein option

But before getting carried away with the idea that a ‘national home’ for Jewish people in Palestine was an inescapable outcome, it is worth considering some other plans British imperialism had for the Promised Land. Two stand out and they were made before the much more famous Declaration. The first British proposal was implied by the correspondence in 1915-16 between the British High Commissioner in Cairo, Sir Henry McMahon, and Sharif Hussein, the Emir of Mecca.

It is important to realise that the background to this communication was the British attempt to get support from the Arabs for an attack on the Ottomans in the Middle East. In 1914, Turkey had taken the Central Powers’ side in the war, and the British were aware that there was some political opposition to Turkish rule in Arab areas of the Ottoman Empire that they might exploit.

As an incentive for this opposition, the British offered a kind of Arab independence over a vaguely defined region, with two caveats. One was that, as McMahon stated, ‘it is understood that the Arabs have decided to seek the advice and guidance of Great Britain only’ in the administration of such an area and they would also give Britain economic and commercial privileges over other powers. But perhaps the most important caveat was on the territorial region of Arab ‘independence’: it would exclude certain areas that the British might have to concede to the French, a British ally in the war that also looked forward to greater influence in the Middle East when the Ottoman Empire was carved up.

Quite which territory was excluded from the offer to the Arabs was not entirely clear. Sharif Hussein read in McMahon’s letters that these concerned an area of Syria west of Damascus. He rejected that, but continued the correspondence and the discussion of terms. Nevertheless, he did not think that Palestine or the important religious centre of Jerusalem were excluded. While Palestine was also west of Damascus, it was further south and not considered to be part of Syria.

Historians have long debated how far McMahon deliberately misled Hussein. It is probably best to see McMahon’s letters not just as an example of manipulative diplomacy, but also as contingent on the circumstances. After all, even the more explicit commitments of the McMahon-Hussein correspondence were completely contradicted by the Sykes-Picot Agreement of early 2016!

The latter Agreement was a plan to divide up the Middle East into regions run by the British and the French. The French felt they had been short-changed, but they got Syria – and Lebanon, which they later carved out from Syria. The British would not accept French rule in Palestine, however, since it was a little too close to Britain’s important strategic and trade route at the Suez Canal in Egypt to have a rival power sitting there. In discussing with François Georges-Picot, Britain’s Sir Mark Sykes sidelined the issue of Palestine by arguing that it should be managed under an international agreement, one that he was confident would favour British interests. That turned out to be the British Mandate for Palestine, endorsed by the League of Nations in negotiations after 1918, in which the British included the terms of the Balfour Declaration.[2]

It turned out that not even the Sykes-Picot Agreement between two imperialist powers was implemented as agreed. Responding to a more favourable conjuncture after 1918, the British were in a much stronger position than the French and no longer had need to take account of potential Russian incursions into the Middle East region, for which they had favoured a French ‘buffer’ in Syria. The British also decided to shift a portion of the Sykes-Picot ‘line in the sand’ and included Mosul in the newly carved out Iraqi state that they would control. This was seized from the defeated Ottomans and added to the oil reserves available to the British.

A deal with the Ottomans?

Britain’s second pre-Balfour plan for Palestine was discussed indirectly with the Ottoman Empire in July 1917. The British Foreign office sent Aubrey Herbert to Switzerland to discuss with Turkish dissidents the possibility of having a separate peace with Turkey. Herbert was a Conservative MP, the son of an earl and had considerable experience of the Ottoman Empire, which he much favoured over Tsarist Russia. For some time he had been advocating this plan, and the British government was happy to explore it as a means of weakening Germany’s position in the war.

As was typical of the British in these diplomatic discussions, much was implied and little was made explicit. Herbert said he was not authorised to discuss terms of an agreement, but he indicated that Britain would not wish to seize Ottoman territories. Instead it would allow continued Turkish control, with (left unsaid) the British pulling the strings as it had done in Egypt. There is no documentation of these discussions, but if they had reached fruition, they would have allowed Palestine, among other regions, to remain in a reconfigured Ottoman Empire.

In a memorandum to the Foreign Office after the Swiss meetings, Herbert made clear what kind of future he, and the British, had in mind for the Ottoman territories:

“If we get the luggage it does not matter very much if the Turks get the labels. When Lord Kitchener was all-powerful in Egypt his secretary was wearing a fez. Mesopotamia and Palestine are worth a fez.”

Nothing came of this Ottoman initiative, as indeed nothing came of the McMahon correspondence. They are nevertheless useful examples of how one should not take at face value the ‘news’ that does get into the headlines. Very often there is something else going on. Furthermore, as in many other cases, an investigation usually suggests that the term ‘Perfidious Albion’ does not do justice to the full extent of British duplicity.

Tony Norfield, 18 June 2019

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[1] Some material for this article is taken from the very informative book by Jonathan Schneer, The Balfour Declaration, Bloomsbury, London, 2011.

[2] In the event, Britain limited the scale of Jewish immigration into Palestine during the Mandate period. It turned back boatloads of Jews escaping the Holocaust in Europe, even though they had nowhere else to go. America, Britain and other countries were reluctant to accept the refugees and the British did not want to damage their relationships with other Arab countries.

Trump, Syria & the Middle East

The US has hit Syria’s Shayrat military air base near Homs with 59 Tomahawk cruise missiles. Whether there is any more to come nobody can say because the strikes do not appear to have much logic to them and so war aims cannot be drawn from political objectives.

But the central weakness flows not from Trump’s knee-jerk response but from the dubious nature of the event that provoked it. A chemical attack by Syria simply does not make sense. Assad has virtually won his war by sheer perseverance, western incompetence and Russian help. At the least, he has no viable opponents on the ground. His strategy is to sit it out while his opponents exhaust themselves, realise the futility of their actions or just leave the country. The West, when it tried at last to put down some sort of marker in a war it could do nothing about, defined the use of chemical weapons as a red line. The Russians agreed and Assad followed through. He gave them up in a quid quo pro negotiated by the Russians. In return, the West abandoned ‘regime change’ in all but words. Both sides kept to the agreement. Why would Assad now use a weapon that could only provoke the West and which is of very limited military use, and one day ahead of a major international meeting on Syria held in Brussels? Former Congressman Ron Paul, a leading, although sometimes critical Trump supporter, argues that the chemical attack is ‘false flag’ operation: “It doesn’t make any sense for Assad under these conditions to all of a sudden use poison gases – I think there’s zero chance he would have done this deliberately”.

Far from showing Trump’s willingness to ‘go to war’ – reversing his supposed ‘isolationism’ which, in any case, was a silly and unrealistic proposition – the bombings instead show the West’s very limited options in Syria. If the West really wants to eliminate Assad, why slam 59 missiles into an isolated airfield? Why not do some real damage, and show ‘global leadership’, by destroying Assad’s military command and control structure?

The plain fact is that while America has the military means to obliterate whatever it likes, both America and the West as a whole has very little power to influence events.

The West would not be able to contain the fall out if Assad were forcibly removed

The US probably has the capacity to ‘take out’ Assad in a surgical strike, or seriously to degrade his already limited military capacity, though his regime is pretty smart and also has Russian assistance. But how would his removal by force affect regional players?

For example, Iran is currently a stabilising force in the region since it wants to rebuild its relationship with the West and wants to show that it can be a trusted, competent and effective regional manager. A significant section of the Iranian elite, and the Shia community in the region, do not believe this can be pulled off and that such a strategy will only weaken Iran in the long run since Western imperialism cannot change its nature.  How would killing Assad alter this critically-balanced situation? Almost certainly not in the interests of the West. Eliminating Assad by force, and the fall out that comes after it, would significantly alter Iran’s position as a regional manager.

Furthermore, Turkey is currently playing a very dangerous game in pursuit of establishing itself as the main player and arbiter in the region. Its overriding goal had been to join the European Union. But it has abandoned all hope of joining by negotiation. It has realised instead that potential EU entry is not about reason or willingness to be reasonable, but about power. It thinks it has a much better chance of forcing a better long-standing deal with Europe by establishing its status as the region’s key pacifier and manager, which Europe desperately needs. This has led it to meddle in regional politics in hugely irresponsible ways that are often counter to western interests and alarm the West. Indeed, Turkey is now the main obstacle to a settlement in Syria.

It is very likely that Assad’s removal would embolden Turkey to be even more reckless. Turkey would almost certainly want to take a major position in a post-Assad Syria, if not to subjugate Syria under its control, which would immediately snarl up all regional relations. This would reproduce Turkey’s inability to reach a settlement with the Kurds on a much grander scale.

Then there is Russia. The West has been forced to establish an uneasy and very limited ‘partnership’ with Russia, given that it has been unable to handle on its own the mess it has made of the Middle East. This has obliged the West to accept that Russia is a legitimate regional player and to accept its more active military presence in the Eastern Mediterranean – something unthinkable in the Cold War years. Russia plays a peculiar role in the region. Most of the regional players are anti-Russian, but they want Russia to serve as a counterweight to the power of the West. Iran is by no means a Russian ally, but it benefits greatly from Russia’s presence in the region. Assad’s violent removal would not only be a defeat for Russia, it would perturb regional relations.

What replaces the Assad regime?

If the Iraq war and its fall out has shown the West anything, it is that military action alone cannot achieve stability and war has unexpected consequences. As Napoleon once said of the limitations of war, “you can do anything with bayonets except sit on them”. War can be the continuation of politics by other means if there is a plausible political settlement at the end of it. Clausewitz in reverse does not work.

Perhaps all this explains the almost apoplectic Western response to Syria, including that of western liberals and former radicals. It is a response born of their frustration about the absence of a military or political solution they can be in charge of, rather than a willingness to go to war.

Susil Gupta, 7 April 2017

Economic Power and Corruption

In an aphorism often quoted, Lord Acton remarked that “Power tends to corrupt and absolute power corrupts absolutely”.[1] But what if it turns out that, in the world economy today, the greater the power, the less the corruption, and vice versa? Lord Acton was talking about the exercise of power in particular countries, but the inverse of his aphorism is more accurate today when one takes an international perspective. It should not be seen as a perverse result that richer, more powerful countries often tend to be less corrupt. Instead, it should be seen as a sign that these countries find that the capitalist economy works for them more straightforwardly, rather than their elite groups having to overly depend upon patronage, nepotism, bribery and gangsters. Richer countries also use such methods, but, according to common observation, not so much as the others do so domestically. They are happier to depend upon the laws of the capitalist market that they have made, and from which they benefit, although they are happy to engage in corruption when doing foreign deals.

Of course, power and corruption are difficult things to measure, if this is at all possible. Transparency International (TI), a non-governmental organisation based in Berlin, produces a commonly used index of corruption, a Corruption Perception Index (CPI).[2] While capitalist establishment organisations and companies fund TI, so its ‘independence’ might be questioned, its reports have also embarrassed many. For example, it argues that no country is corruption free and it cites cases where countries that look to be ranked highly in terms of having little corruption domestically are nevertheless the headquarters of corporations that are heavily involved in bribing other countries: “half of all OECD countries are violating their international obligations to crack down on bribery by their companies abroad.”

Research produced by TI suggests that richer countries are the ones least corrupt. Lord Acton was not suggesting that economic wealth or income was an index of (political) power, but there is some common sense logic to there being such a relationship. I have taken figures from the OECD for the median household disposable income in a country as a measure of ‘average’ income. The median level is where half the population are above and half below that measure of income, so the higher the median, the richer the people in the country.[3]

The chart shows a scatter diagram of the relationship between median income levels and TI’s corruption index. In TI’s index, a higher number means less corrupt, a lower number more corrupt, with the range from 0 to 100. Denmark has the highest score in its latest 2015 report, with 91, a decent amount below 100. I have standardised the income measures for 36 countries measured by the OECD in a 2015 report so that the one with the highest median income of $41,355, the US, gets an index number of 100, while Brazil, for example, with barely more than a quarter of that level gets an index number of 28.

For the statistically minded among readers, the correlation coefficient is positive and 71%. In other words, a higher income is very closely linked to a lower level of corruption. Correlation does not necessarily mean causation, but the long-established rich countries have a legal, political and business culture that is often not noticed, or taken for granted. That ‘good’ domestic business culture may not extend to outside dealing. Weaker countries are more easily corrupted by the economic power and influence of the stronger, something that, ironically, will also make the former countries look more corrupt than the richer ones.

This is perhaps a simplistic exercise, one that uses a flawed economic measure of well being against a measure of how corruption is ‘perceived’. This measure of corruption will also pay little attention to the influence and power of money in the media and in election campaigns (don’t mention the US!), and seems to be oriented to how ‘clean’ are the possibilities to engage in capitalist business. Such a perspective leaves out of consideration that a capitalist way of organising the world economy is, how to put it nicely, very far from ideal.

Country Household Income and Levels of Corruption, 2015

Note: 2 letter ISO codes identify the countries shown.

Nevertheless, the pattern of countries being richer and also being less corrupt is clear from the chart. So, Russia (RU), Mexico (MX), Brazil (BR) and Turkey (TR), for example, are not far off the bottom (bad end) of the corruption index and also have among the lowest incomes, or less than half the US level. There are few surprises there, given recent media stories. By comparison, the rich Anglo countries are among the least corrupt, along with other rich Europeans. I have not detailed all countries, but the general pattern is clear and, for countries, contradicts Acton's observation.

Tony Norfield, 25 April 2016

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[1] See a fuller quotation at: http://history.hanover.edu/courses/excerpts/165acton.html. Also note that it is rarely mentioned, for obvious reasons, that, in this 1887 letter to an Archbishop, Acton said: ‘if what one hears is true’ then Elizabeth I and William III instigated murders and they should have been hanged!

[2] Transparency International Index available at http://www.transparency.org/cpi2015

[3] The median figure is less distorted than the mean by the very high incomes of the very rich. Figures are taken in terms of current US dollars at ‘purchasing power parity’ terms. OECD data are from its Better Life Index, 2015 Edition, http://stats.oecd.org/Index.aspx?DataSetCode=BLI

 

Saudi Arabia and Imperialism

Saudi Arabia has been a major player in Middle East politics. It backed the 2013 overthrow of the Moslem Brotherhood in Egypt, since the example of an elected government of a major country next door was not welcome to the Saudi family autocracy. It has suppressed Shia-based protests in Bahrain and Yemen and has sought to spread its version of Islam around the world, with the funding of Wahhabi schools/madrasas, while it is well known that Saudi plutocrats have funded ISIS/Daesh in Syria and Iraq.[1] In the economic sphere, it plays the role of being a major low-cost ‘swing’ producer of oil. Its 2014 decision to continue oil production was a factor (apart from world economic stagnation) leading to the slump in oil prices, its logic being to undercut the growth of rival energy production, especially shale oil and gas in North America, as well as more costly oil production elsewhere, including in Russia and Iran. Accumulated Saudi oil wealth remains huge, but its income is now diminishing, leading to record public spending deficits and the reduction of its bank balances overseas.

In the early 20th century, Ibn Saud’s political skills and military strategy outmanoeuvred his opponents, helping him extend his power from his initial base in the eastern Najd region and to rule over the Najd by 1921.[2] By 1926, he had also conquered the western Hijaz region, including Mecca and Medina. In 1932, these regions were formally put under Ibn Saud’s rule, to form the Kingdom of Saudi Arabia. The late-1930s discovery of oil in Saudi Arabia changed many things, and brought the US into the equation as well as providing the Saudis with untold wealth. A review of these developments helps show that the Saudi regime is more transitory than it might otherwise look. Far from being a solidly established, and immovable, reactionary force in the region, and for all the appearance of power, the Saudi edifice is on shaky ground.

Regional economics, politics and the major powers

In the early 20th century, the Middle East region was dominated mainly by the Ottoman Empire (Turkey), with the British, the French and the Russians also having a look in. Russia’s defeat in war by Japan in 1905 and its revolution in that year put them out of the game, but the British were still concerned about potential Russian interference in their plans. Britain’s focus in this region was mainly on its commercial and colonial empire, defended by the British navy, especially in the trade with India. This made Egypt (the Suez Canal), the Red Sea and the Persian Gulf critical areas. In the first decade or so of the 20th century, Britain was not much bothered with the Arabian interior, seeing it as a desert full of trouble rather than profit. Instead it focused on doing protection deals with coastal sheikdoms such as Kuwait, Bahrain, Oman, etc. Britain’s strategic terms were: ‘we protect you, and you make no agreements with anyone else unless we say so’. France had far less of a role in this region, although it had built up a presence in Syria and Lebanon. Instead, until World War 1, the Ottoman Empire was the main ruler, although its governmental power was fragile. The Sublime Porte, the central government in Istanbul, was in charge of the Empire, taking allegiance and collecting taxes. But in the case of the Arabian peninsular this usually meant paying off local rulers, including Ibn Saud, to prevent political unrest. It is unlikely the Ottomans made any money out of this part of its Empire, although it gained prestige from being in charge of Mecca, the central location for pilgrims and the religious centre of its own Islamic rule.[3]

When the Ottomans made the mistake of backing the loser in World War One, Germany, the victors dismembered what remained of their fragile Empire after 1918.[4] The beneficiaries were Britain and France, largely based on the infamous Sykes-Picot Agreement in 1916, which was struck even before the war was over. As a sign of imperial priorities, France was at least as concerned about its colonial possessions as it was about the fact that it had been invaded by Germany!

The Hijaz and the Najd – the western and eastern areas, respectively, of what became most of Saudi Arabia’s territory – were not really part of this imperial land grab. France had had little or no influence there before, and did not do much to get it later, while Britain was not interested, except for the Red Sea and Persian Gulf coasts, an important route to India, and Palestine, the hinterland to the Suez Canal in Egypt. Britain backed any locals who would do its wishes. After war broke out, the main British objective was to oppose the Ottomans, and this meant backing rival forces, Hussein, the Sharif of Mecca and also his opponent, Ibn Saud. Britain could not afford to allocate many troops or to get heavily involved in struggles in Arabia’s interior. Hence, Lawrence ‘of Arabia’, a British intelligence officer, had the role of organising the Syrian-based support for the Arab revolt against the Ottomans. Lawrence deceived the Arabs about prospects for independence, underplaying the role of Britain, by using Hussein as a figurehead (however, he did not know until later of the Sykes-Picot Agreement to hand Syria over to the French). Meanwhile, the British supplied both Hussein and Ibn Saud with weapons and money to achieve these aims.

Sharif Hussein had ambitions for rule over more than just the Hijaz, including Mecca and Medina. Prompted by promises of British support, he played a key role in the start of the Arab revolt against the Ottomans in 1916 and soon declared himself ‘King of All Arabs’. This presumption annoyed the British, who were looking for widespread Arab support against the Ottomans. Hussein could be a useful figurehead, but did not have sufficient authority over and loyal support from rival groups as Ottoman power began to crumble. Above all, the declaration only served to increase Ibn Saud’s opposition to Hussein. Unfortunately for Hussein, Ibn Saud was a much smarter operator in the region, both politically and militarily, and by 1926 had consolidated his power in Hijaz as well as the Najd.

The British did not want to intervene in this battle directly, posing it as a religious affair outside their political concerns. However, the British were happy to sideline Hussein and to support Ibn Saud. Hussein was less acceptable to Moslems from the Indian colony than Ibn Saud, and he had also shown an unforgivably obstructive attitude by refusing to sign Anglo-Hijaz treaty in 1921. That treaty would have bound Hussein to accept the terms of the mandate Britain had secured from the League of Nations regarding Palestine, one that greatly restricted potential Arab independence and also allowed for the setting up within Palestine of a ‘national home for the Jewish people’.[5] After being defeated by Ibn Saud, Hussein abdicated in 1924 and was shipped off by the British into exile in Cyprus, a British colony, then Jordan. The Palestine issue was not among Ibn Saud’s concerns at that time, given that he was focused on establishing his rule in the Arabian peninsular.

In the immediate post-war years, two of Hussein’s sons were nevertheless useful for the British, even if their father’s imperial value had declined. Faisal, the youngest and most able, was first sent to Syria as King. But the French were as suspicious of a UK ally as they were of Arab nationalism and expelled Faisal after the Franco-Syrian war in 1920. France wanted to make sure it would be in control of Syria and Lebanon after being given the mandate for them by the League of Nations. In 1921, the British decided to install Faisal as King in its own mandated area of Iraq instead, based on a rigged plebiscite showing that this person, previously unknown to the Iraqis, had 96% support! Hussein’s older son, the incompetent Abdullah, was trickier to deal with. For him, the British invented a new ‘state’ – Transjordania, later Jordan – in the eastern part of mandated Palestine, and warned Ibn Saud to stay clear of seizing any Jordanian territory.

These changing power relationships and regional turmoil gave Ibn Saud an unusual degree of freedom. He was able to build up a Wahhabi military force loyal to him, the Ikhwan, based upon his family’s previous links with this version of Islam. This force played a key role in seizing Hijaz in 1924. Later, Ibn Saud took action to disband the zealous and brutal Ikhwan, and also made efforts to settle the tribal groupings in the Najd and elsewhere, tribes whose economic modus operandi had been largely dependent upon robbing, or getting protection money from, the many pilgrims en route to Mecca. Ibn Saud’s plans very much depended upon him getting financial subsidies from outside powers, formerly the Ottomans and then the British. After 1916, he got some £5,000 per month or more, a considerable sum, since that was when the purchasing power of one pound sterling was more than a little higher than it is today. Ibn Saud was getting up to £10,000 per month from Britain in 1919.[6] This dependency was based upon the limited economy of the region, which had little agricultural potential and no industry.

US interest and the Saudi regime based on oil

It was the discovery of oil that changed everything for Saudi Arabia. From being a cash-strapped political and military leader inspired by his own dynasty, one who was always running short of funds as he bought loyalty, oil revenues made Ibn Saud – and the favoured ruling elites – fabulously wealthy. However, this was a slow process and one that, as with the earlier foundation of the Kingdom of Saudi Arabia, evolved in the context of rivalries between imperial powers.

In the 1920s, the US produced the bulk of world oil, accounting for just over 70% of total production. This gave the US government little incentive to seek alternative sources of oil outside its territory. Britain had already focused on oil since it had switched the power source of the Royal Navy from coal to oil, but it had by then secured large-scale oil supplies from Iran. When oil was discovered in Bahrain in 1932, however, this led US oil company explorers to surmise that Saudi Arabia might also be a potential source of supply. Ibn Saud was happy to choose a company from the US to do the exploration, since he had more suspicion of French and British colonial designs in the region. In May 1933, his finance minister signed a deal with Standard Oil of California to do the prospecting in the eastern half of Saudi Arabia. At the time, this was simply another means for Ibn Saud to get some revenues. If the Americans were dumb enough, and rich enough, to pay for exploration rights when there was far from any certainty that oil would be found, that was a good bet according to his previous economic experience. Socal paid an upfront £50,000 and a retainer of £5,000 per annum, with an agreement to pay another £100,000 on any discovery and four shillings per ton of oil actually produced.

This sterling denomination of the initial contract amounts (four shillings was 0.2 pounds) indicated that the UK was the major economic power in the region at the time, and the one that had the closest links with the Saudis. US companies had been restricted from other sources of supply in the Middle East (apart from Bahrain) by cartel arrangements of the Turkish (then Iraq) Petroleum Company, a consortium mainly owned by the British-run Anglo-Persian Oil Company (later BP) and Royal Dutch Shell (Anglo-Dutch), with the French Compagnie Francaises des Petroles demanding Germany’s former interests. Only later, from 1928, was a group of US companies admitted to the consortium. However, all those arrangements were to change in the following decade or so, in favour of Saudi Arabia and the US, including a switch of currency payments into US dollars and a dramatic boost in Saudi oil production. Saudi Arabia’s share of world oil production rose from zero in 1938 to 5.6% in 1950, not far behind Iran, while the US share had dropped to 56%.

Several changes had occurred in imperial calculations from the early 1940s. World War Two had brought home to all countries the importance of access to oil supplies for military strategy. It was an important feature of Germany’s focus on moving into Eastern Europe, for example. The US had also become a net importer of oil in the early 1940s, after having previously been self-sufficient. As a result, the US government got more directly involved in Saudi Arabia, although it only established an embassy there in 1942. The US government felt that it needed safe supplies of oil in case western hemisphere output (mainly US and Venezuelan) diminished or was insufficient. For the US, the Saudi alternative was also important as a power lever against rival countries, and it especially wanted to prevent the UK from monopolising Middle Eastern oil supplies. Saudi Arabia was also less open to influence from the Soviet Union, so it seemed, with a Wahhabi-based religious dynastic state being at the other end of the political spectrum from the Communist atheists. The Wahhabis even despised, and often murdered, fellow Moslems, if they were not the right kind of Moslem.[7] The US strategic alliance with Saudi Arabia was a union of corporate and national US interests that has held for a long time, although it may now be coming under pressure.

In economic terms, while Saudi Arabia’s oil was high in sulphur content, so less valuable per barrel than Iran’s or that available in Texas or the UK’s North Sea, it was much cheaper to extract, so offsetting the extra processing cost. This made it very profitable for the US oil companies that became Aramco (the Arabian and American Oil Corporation), especially since they gained a tax break from the US government on their foreign profits. It was also a boon for the Saudis, although they, like other commodity producing countries in the imperialist world economy, found that they were not getting perhaps all that they might from the production taking place on their territory.

It took initiatives from other oil producing countries to encourage the Saudis to get a better deal for their oil from the major corporations in the 1960s and afterwards. By the early 1970s, the Saudis also began to take over shares in Aramco, eventually buying them out, and the company was renamed as Saudi Aramco in 1980. However, Aramco’s US-based partners continued to operate the production facilities.

The group of oil producing countries, OPEC, hiked the price of oil from the early 1970s, and this also boosted Saudi revenues. The price hike was prompted largely by oil shortages and the falling purchasing power of what had for a very long time been stable, nominal US dollar oil prices, especially as the value of the dollar fell significantly on foreign exchanges. However, the move was also in the context of the Arab-Israeli war in 1973, in which Arab countries imposed an oil embargo on Israel-supporting western powers. Between 1950 and 1969, a benchmark US oil price had been close to $2.5-3.0 per barrel (with Saudi crude at less than $2), so the rise to $10 by 1974 and $40 by 1980 was a big shock for the world economy – and a big positive for US oil corporations and Saudi finances. Saudi government oil revenues rose from less than $2 billion in 1970 to around $85 billion in 1980, helped also by a near-tripling of oil output.

But now there are Saudi economic and political problems

In 2014, Saudi Arabia had around a sixth of the world's proven oil reserves and was by far the largest producer (one-eighth of the world total) and exporter. The petroleum sector accounts for four-fifths of the government’s budget revenues, nearly half of GDP, and 90% of export earnings. However, the extravagant oil price levels of more than $100 per barrel in 2014 are no more. Such prices had encouraged high cost shale oil and gas production, especially in the US, and also a higher output of oil from other producing countries looking for more revenues. The high price levels were also an economic pressure on importing countries, and eventually depressed world demand, adding to the renewed stagnation of the world economy.

However, the fall in prices did not stop Saudi Arabia maintaining oil output, rather than curbing output to help support oil prices as it had done on previous occasions. The new Saudi logic was to discourage the extra, higher-cost suppliers and to maintain its market share. But its problem now is that it has embarked upon big expenditures in recent years – including promoting the coup against the Moslem Brotherhood in Egypt, putting down rebellions in Yemen and Bahrain, and funding its own version of Islamic politics in many other countries, not least in Syria and Iraq. Given the already generous funding of social programmes to buy political stability, this has led to a huge deficit in Saudi Arabia’s public finances of close to 20% of GDP in 2015.

This means that the Saudi government faces very big economic pressures, ones that have only strengthened its repressive instincts. However, while they retain huge wealth, including some $630bn in foreign exchange reserves (although that is down from a peak of $745bn in 2014), their fragile social basis is shown in the facts that expatriates do half the jobs in the country and, with half the population under 25, youth unemployment is 30%. Given their upbringing in this rentier state, many Saudis view ‘ordinary’ jobs as beneath them, and around 8 million of the country’s 27 million population are non-nationals. The economic impact to come as the limits of oil wealth show themselves is liable to result in a social and political crisis. This is one reason why, in what came as a shock to the financial markets when it was announced last week, Saudi Arabia is now thinking of selling some shares in its prized Saudi Aramco to raise funds.

A longstanding problem for the Saudi state arises from its sectarian religious outlook. The Wahhabi version of Islam has been a means by which the ruling family has controlled society and terrorised opponents, especially Shia Moslems who make up somewhere between 10-15% of Saudi Arabia’s population. However, there is a majority Shia Moslem population based in the Eastern Province, the location of most of its oil production. The Shia, together with many migrant labourers, do most of the work there.

Saudi strategic trouble

It may be thought that huge Saudi wealth will be enough to shelter the regime from problems. After all, extravagant deals in weapons and other items with the US, UK and France do buy it support. The US also has a number of important military bases in Saudi Arabia. The UK’s continuing links were shown when it halted a Serious Fraud office inquiry into bribery and the Al-Yamamah deal with British defence companies, and when it fixed the vote so as to get Saudi Arabia onto the UN Human Rights Council! However, political risks arise from the Saudi elite’s economic upbringing. As a friend once remarked to me about the Saudis: ‘when you have too much money and you do not have to work or think for a living, your brain turns to mush’. Whereas Ibn Saud was successful in managing imperial rivalries and pushing aside local opposition to establish his extended family’s state, since his death in 1953 later generations of Saudi rulers have shown increasing signs of mushiness.

Saudi Arabia sees Iran as its main strategic rival, or at least as a potential supporter of Shia populations in the region that have a low economic status in Sunni-run regimes. But there has now been a deal with the US to lift sanctions on Iran, after an agreement with the International Atomic Energy Agency (also known as an arm of the US government). Sanctions could begin to be lifted from as soon as next week. The Saudis (as well as the Israelis) are not happy. This was likely one reason, apart from their general crackdown on Shia dissidents, for them to execute Shia cleric Nimr Al-Nimr on 2 January. They may have hoped to prompt Iran into taking clumsy political moves in response, but Iran was not so stupid. As a sign that the tide may be turning against them, instead all that happened was that Saudi Arabia’s ‘human rights’ record was once again splashed over the world news media. The Saudi apologia that most of the 47 executed were Sunni did not go down well.

The lifting of sanctions on Iran will encourage many western capitalists to get into this big market, and that will drive major power politics on Iran, no matter what the Saudis do. Iran and Russia are, for now, seen as partners by the US in the battle against ISIS, which is one of the biggest sources of trouble for them and other powers. In contrast, although they do not say so publicly, the US knows full well that ISIS has been funded by Saudi and other Gulf citizens. A US State Department cable, dated December 2009 and recently published by Wikileaks, made it clear that ‘donors in Saudi Arabia constitute the most significant source of funding to Sunni terrorist groups worldwide’. Saudi Arabia’s alliance with Turkey against Assad in Syria is also not working out. Turkey has been identified as a source of funding and support for ISIS too, while its economy is in trouble and likely to get worse, following Russian sanctions after Turkey’s air force downed one of its jets in November.

Saudi Arabia has been worried about the changing balance of power in the region, but its actions have destabilised things further and are worrying its western allies as well as Russia. For example, the main Saudi political player is Mohammad bin Salman Al Saud. He rejoices in the titles of Deputy Crown Prince, Second Deputy Prime Minister and Defence Minister. In December, the BND, Germany’s foreign intelligence agency, noted that he was ‘prepared to take unprecedented military, financial and political risks to avoid falling behind in regional politics’. This referred to his support for the Al-Nusra Front in Syria and his aggressive military intervention in Yemen. All of this has turned into a never-ending disaster, contrasting with what the report described as ‘the careful diplomatic stance of older members of the Saudi royal family’. MbS, as he likes to be known, is the favourite son of the 80 year old King Salman, who is suffering from dementia, and is now lining himself up to be the future ruler of the Kingdom.

MbS will find that he has less room for manoeuvre than Ibn Saud. There is no sign that the major powers are concerned about Yemen, but they are very closely watching what goes on in Iraq and Syria, although they have little ability to control events there. The forces unleashed could also come back to damage MbS himself, since there is no reason why ISIS would want to exclude its ‘caliphate’ from Mecca, for example.

Saudi Arabia is a creature of imperialism in the Middle East region, one that for a while got lucky, both with the major powers being otherwise engaged or not much concerned, and more so with the discovery of cheap oil reserves. But, despite its wealth, Saudi Arabia has failed to develop its economy and society and instead has contributed to the blood and gore that are the hallmarks of the modern imperialist world.

Tony Norfield, 13 January 2016

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[1] This is not to say that ISIS gets the bulk of its money from Saudi Arabia (or other Gulf states). Most of ISIS money comes from selling oil and extortion, and its weapons have generally been supplied – if only indirectly, in terms of being seized from the ‘moderate’ rebels – by the US, Britain and France.

[2] There are many different English spellings of the original Arabic terms and different ways of referring to the people involved. I will use what I have found to be the most common spellings, and also to refer to the first ruler of Saudi Arabia as Ibn Saud, rather than the (much) longer Abdulaziz ibn Abdul Rahman ibn Faisal ibn Turki ibn Abdullah ibn Muhammad Al Saud, or other variants. Note that the Arabic term written in English as ‘ibn’, or alternatively ‘bin’, means ‘son of’.

[3] It should be noted that the Ottomans were relatively liberal regarding religious allegiance. The key point was: pay your taxes and do not cause trouble, and we will leave you alone. Hence, Jews, Christians and others were welcome in the Ottoman establishment, even if they did not have the full rights of (Sunni) Moslems.

[4] Austria-Hungary had already annexed Bosnia-Herzegovina from the Ottomans in 1908 and Italy had seized Libya after a war in 1912.

[5] This was a version of Britain’s infamous Balfour Declaration in 1917, one that at a critical stage in World War One offered a big concession to Zionists, while also claiming not to prejudice the rights of non-Jewish people in Palestine. This is not the main topic of the article here, but it is worth noting that the British were past masters at such ambiguity. There were certainly some Zionist British ministers, but also many who did not want to upset their relationships with the Arabs. A previous set of ambiguous commitments that was more in favour of Arab independence from the Ottoman Empire was the Hussein-MacMahon correspondence in 1915-16. A key motive for the Balfour Declaration was to get support from US-based Zionists to strengthen US support for British policy in the war. Far from the Balfour Declaration showing unequivocal British support for establishing the State of Israel, Britain later tried to limit Jewish immigration into Palestine and faced numerous attacks from Zionist forces, including the assassination of Lord Moyne in 1944. A final brief point to note an outrageous non sequitur and extra crime: the Europeans compensated for their slaughter of Jews by aiding the theft of Arab land!

[6] The British stopped their subsidies of Ibn Saud after a dispute in the mid-1920s with Hussein, but resumed later. This longstanding relationship was enough for the US government initially to consider it a fact of life about which they could do little.

[7] In case European readers get all superior about the Wahhabis, they should remember that it would be difficult to top the number of murders of Catholics and Protestants in Europe (in the 16th century and after) in the name of Christianity. Religion was, and still often is, a sign of social-political status or allegiance.