Energy: Risky Road of Retaliation

Whispers about retaliation against the Arabs have been heard since the beginning of the oil boycott, and last week Secretary of State Henry Kissinger voiced them out loud. In a press conference, he warned that if the embargo continues “unreasonably and indefinitely, the U.S. will have to consider what countermeasures it will take.” Saudi Arabia’s Oil Minister Ahmed Zaki Yamani promptly replied that the Arabs might then cut oil production by 80% rather than just 25%, and destroy the economies of Europe and Japan.

There are indeed countermeasures available to the U.S., but they are likely to prove either ineffective or disastrously risky. They fall into three classes:

ECONOMIC. The U.S. could stop exporting to the Arab countries the hundreds of millions of dollars of food and manufactured goods, such as autos and refrigerators, that the Arabs buy each year. That, however, would be totally ineffective unless the U.S. could persuade its European allies to join in the boycott. Otherwise, the Arabs could easily buy all the manufactured goods they need from Italy, France, Yugoslavia and other European countries. Right now the Europeans are so disunited and so eager to curry favor with the Arabs that they are talking about retaliation not against the Arabs but against one another. A concerted Western boycott on manufactured goods would hurt the Arabs, but the West needs Arab oil more than the pre-industrial Arab states need modern manufactures. As for food, Agriculture Secretary Earl Butz pointed out last week that the Arabs could readily replace U.S. grain with grain bought from the Soviet Union, which has enjoyed a record harvest this year.

The U.S. could try to freeze Arab oil money; about half of the $7 billion that Saudi Arabia and Kuwait have on deposit in the West is in U.S. banks. But much of that is held by European branches of the American institutions —and the Swiss government, for example, is unlikely to permit Swiss branches of U.S. banks to block Arab funds.

Moreover, unless the freeze was accomplished almost instantaneously, the Arabs could sell their threatened dollars for gold or other currencies, destroying the strength that the dollar has only lately begun to regain after two devaluations and a long siege of selling.

POLITICAL. The U.S. could withdraw its military mission from Saudi Arabia, possibly troubling King Feisal, who has running difficulties with the Iraqis and South Yemenis, but the French would be happy to send a military mission as a replacement. The U.S. could also refuse to sell Saudi Arabia some 30 Phantom jets it has been dickering for. That would only confirm an apparent Saudi decision to buy French-made Mirages instead.

There is some talk among European and U.S. politicians and businessmen of an effort to get the United Nations to declare Arab oil an “international resource,” which would be thrown open to all buyers under U.N. supervision. But such a resolution would never pass the General Assembly, where poor countries hold the voting majority.

MILITARY. Unhappily, the one countermeasure that would be effective would be invasion and occupation of the Arab oilfields.. The U.S. could easily defeat the Arab armies, and though the Arabs would probably blow up the wells, the technology of oil production in the desert is so simple that the U.S. could get some oil flowing again. Setting aside all moral considerations, however, such a course would carry a cataclysmic risk. Unless the Soviets agreed in advance to look the other way—not a likelihood —military action could ignite World War III for the U.S. and the Soviet Union. Even if the Soviets did not intervene as protectors of the Arabs, occupation of the fields would let the U.S. in for an endless guerrilla war.

The most effective strategy that the U.S. could adopt is also the most constructive: continuing its efforts to broker and guarantee a peace settlement between Arabs and Israelis. The Arabs recognize one key political reality: a U.S. that is angry at Arab intransigence may not pressure Israel as hard to make concessions as a U.S. that has been given reason to believe that movement toward peace will get the oil flowing again. To his credit, Kissinger realized this also: he urged the Arabs to lift their embargo when an Arab-Israeli peace conference opens, as is expected next month. He won support from Shah Mohammed Reza Pahlevi of Iran, which has continued to sell oil to the U.S. The Shah counseled his fellow Moslems in the Arab oil states to lift the embargo now that the shooting war with Israel is over. “Petroleum is like bread,” said the Shah. “It must not be cut off during peacetime.”