We live in times of great historical parallels, to the point that we have gone from a period continually marked by “unprecedented” events and “revolutionary changes”… to another in which the struggle between the United States and China over chips returns us “inexorably” ” to the Cold War… and the new confrontation between Israel and Hamas could supposedly lead to a repeat of what happened in the heat of the Yom Kippur war five decades ago.
In 1973, Egypt and Syria failed in their offensive against Israel, which was settled within a month, but not before leaving a veritable geopolitical tsunami in its wake. On October 19, when the race was less than a week from ending, US President Richard Nixon promised $2.2 billion in arms and aid to Israel. And Saudi Arabia’s reaction was to lead an embargo not only against the United States, but also against the other countries that later supported Washington’s move.
That skyrocketed energy prices and especially impoverished the population of the countries that suffered from the tap being turned off. By then, all major Western economies depended on oil to run their industries, to transport goods and passengers, and even to heat millions of homes.
And Saudi Arabia and many of the major Arab producers of “black gold” were keen to remind the West on whom their prosperity depended. If in October 1973 a barrel of crude oil did not reach 30 dollars, in March of the following year, when the embargo ended, it already cost more than double.
When the current situation is compared to that of five decades ago, it is often assumed, erroneously, that support for Israel was decisive in causing barrel prices to skyrocket. It is thus forgotten that oil never returned to the situation prior to the embargo in the 1970s.
What’s more, when the taps were opened again in March 1974, shortly after Israel withdrew its last troops from the Suez Canal, crude oil barely fell… and closed the year more or less in the same position in which it had ended. started. If the Yom Kippur war had caused the very strong increases, the end of the war should have caused considerable decreases.
Also, for the West’s support for Israel to have been the main cause of the price of a barrel soaring, the oil-producing countries should not have applied strong price increases long before Richard Nixon’s support for the Israelis. That is to say, Western support for Israel against Syria and Egypt should have meant at least a change of trend for the oil policy of the Arab countries.
The reality is very different. As economists David Hammes and Douglas Wills recall in their document “Black gold: The end of Bretton Woods and the oil price shocks of the 1970s”, the collapse of the Bretton Woods regime in 1971 caused a brutal depreciation of the barrel of oil, because It went from being denominated in dollars that depended on the value of gold to being denominated in dollars whose value depended, above all, on the decisions of the Federal Reserve. If in 1970 you could buy 10 barrels with one ounce of gold, in mid-1973 you could buy 34 with that same ounce.
Under these circumstances, it is not surprising that Arab countries have been negotiating significant increases in the price of their main raw material (and source of social stability, palace perks and public income) since the early 1970s. These increases meant that, in 1971, these countries increased the price of a barrel of crude oil in the Mediterranean by more than 30% and managed to raise the taxes imposed on it from 50% to around 60%. The following year, in 1972, another increase of almost 8.5% was recorded and another two more in the spring of 1973.
Hammes and Wills remember that all this escalation, plus the one added by the embargo in 1973 and 1974, did nothing other than return the price of crude oil to the “normal” levels of the decades before the collapse of Bretton Woods, and this is one of the fundamental reasons why the barrel was no longer worth, when peace was agreed, what it had been worth before the Yom Kippur war. Nixon’s support for Israel had by no means been the only important cause of the embargo.
Georgetown University historian David S. Painter adds another interesting layer of interpretation to what happened in the first oil crisis in his writing “Oil and geopolitics: The oil crises of the 1970s and the Cold War.” According to Painter, “the Saudi willingness to end the embargo was probably also influenced” by agreements with Riyadh in which the United States not only committed to “provide military equipment, training and technical assistance,” but also “to protect the regime.” “Saudi against its internal and external enemies.”
It must be noted that the agreements were not officially signed until June 1974, that is, a little more than a week after the peace was signed. That said, and as the Bloomberg agency revealed in 2016 after confidential information surfaced, it is true that those agreements were crucial: we are talking about the starting point of the very close relations between the leading world power and the Saudis, who have since agreed to finance with thousands of billions of petrodollars of US debt. The Saudis, by the way, dedicated part of their profits from the embargo to finance Egypt’s distancing from the Soviet Union and Arab socialism.
According to the Arab powers, the 1973 oil embargo was imposed to punish the Westerners for their support of Israel in the Yom Kippur War, a war that would allow them to recover the territories that the Israelis had taken from them in 1967. However, they undid the embargo and agreed on peace without Israel returning the territories or ceasing to enjoy the military umbrella of the United States. The Saudis punished Washington for offering Israel the same protection that they ended up demanding from the Pentagon. But surely the main purpose of the oil embargo was to punish and deter Westerners?
There is more. By 1971, US oil reserves and production had already begun to decline. The land did not seem to give more of itself, and for that reason, and because the economy and its needs continued to grow, imports of “black gold” took off from 19 to 35% of American demand between 1970 and 1973. The leading world power did not It had room for maneuver in the face of pressure from the world’s largest producers and it could not help, if things got complicated, Japan or its European allies who, in general, lacked their own reserves.
Meanwhile, the Middle East already represented more than 40% of world oil production in 1973, an astonishing figure if we take into account that, in 1950, it was barely 7%. In addition, OPEC had approved a plan in October 1972 to transfer control of Western oil interests in the region to the states of Kuwait, Qatar, Abu Dhabi, and Saudi Arabia. First, public participation would rise to 25% in January 1973, and by January 1983 this should have reached 51%.
In short, the Arab countries knew that an embargo in 1973 would have serious consequences in Western countries, because they lacked sufficient reserves to mitigate the bite, because the world depended on oil production in the Middle East and because nationalizations were rapidly diluting forced the power of Western oil companies in the area.
As can be seen, Western support for Israel was one of the main causes that caused the oil embargo five decades ago, but it was by no means the only one. The collapse in the value of a barrel of crude oil after the collapse of Bretton Woods, the internal dynamics of countries like Saudi Arabia and even Kuwait (today firmly anchored under the military umbrella of the United States) and the Western vulnerability to the rise of the Middle East as an epicenter of world oil production… also had a lot to do with it.
Therefore, even if the reprisals of the Israeli army on Gaza now inflamed the reaction of the Arab world against the support of the United States to Tel Aviv… even in that case, there would hardly be a repeat of what we saw with the Yom Kippur war, the embargo and runaway inflation. History gives meaning to the past, and to our lives with it, but it is neither a photocopying machine nor a crystal ball. And it’s better this way.