End of the oil embargo

The Arab oil embargo of the US ended on 17 March 1974. It had begun as Saudi Arabia and the Arab members of OPEC reacted to the US support to Israel in the 1973 Yom Kippur war. OPEC cut oil production and prices rose from $3 per barrel to over $11.5. Gasoline was restricted in several countries, lines at the gas-pumps grew longer and longer, and inflation accelerated. The balance of payments became negative in many countries. Developing nations were also hit and the economies slowed down. Oil-producing countries on the other hand gained massive amounts of petrodollars.

US Secretary of State Henry Kissinger ran a “shuttle diplomacy” between Tel Aviv and Cairo, secured Israeli withdrawal and reopening of the Suez Canal. The US supported both countries with aid and Egypt under President Sadat swung away from the Soviet Union towards the West. More Arab countries nationalized their oil industry and Western influence diminished. The Arabs acted for once united, gained more respect and efforts were made to solve the Israeli-Arab conflict. But some analysts think the Arabs gave in too easy with too few gains, as no settlement was made with Israel.


A man at a gas station reads rationing in 1974.

Background
Egypt had lost the Sinai Peninsula to Israel in the 6-day war in 1967. Oxford, Associate Professor of the Modern History, Eugene Rogan describes the events in his book “The Arabs - A history”. President Sadat intended to get it back, and understood that he Egypt was not strong enough to beat Israel. But by gaining a partial victory he hoped to win prestige, re-engage the US in negotiation, and negotiate a settlement with Israel. In August 1973 Sadat went to Riyadh to inform King Faisal of Saudi Arabia of his war intentions.  He had refused to use oil as a weapon since they tried and failed in 1967. The difference now was that US oil production had peaked and was falling. Saudi Arabia was now the swing producer able to meet short-run needs. Faisal, an Arab nationalist, pledged his support.

 

King Faisal with President Nixon and his wife Pat.

 

USA oil production and imports. Import increase started when US production peaked.

Some argue that the embargo had very little effect.

Attack and embargo
The Egyptians and Syrians attacked and initially had great success. Then Israel recovered and went on the offensive. All warring parties needed resupplies of arms and munitions, and the Soviets supported Syria and Egypt, while the US secretly air-lifted supplies to Israel. Then, on 16 October the Arab heads of states seeing that the Arab armies had regained some respect, decided to use their oil as leverage. Arab Oil ministers gathered in Kuwait imposed a 17% price hike. Panic spread and by the end of the day market price increased 70% to $5.11 a barrel. The next day, the ministers said they would reduce their production by 5% each month until Israel retreated from all Arab lands occupied in the 1967 war and the legitimate rights of the Palestinians were restored. Only countries supporting Israel would be affected. They opened a diplomatic channel and Arab foreign ministers met Nixon and Kissinger in Washington.  

President Sadat of Egypt.

Escalation
But the US would not give up easily. On 18 October a $2.2 billion arms deal was made with Israel. The Arabs were outraged and a complete embargo of the US was implemented. Production was cut by 25% and by December 1973 a barrel of oil cost an unprecedented $11.65. On the battlefield Israel had regained lost territory, crossed the Suez Canal and threatened Damascus. The Soviet Union threatened to intervene militarily, and the US put their military on high military alert. This was the first time since the Cuba crisis, and a serious threat of nuclear war. But Israel, Egypt, Syria and other Arab countries supporting them had painful losses and were ready to end the war. The UN Security Council negotiated a cease-fire on 22 October, and made Resolution 338 calling for a deal with the exchange of land for peace. In December 1973 a Peace conference opened in Geneva, but it failed.  The Kissinger went into his shuttle diplomacy and brokered a deal where Egypt regained the east bank of the Suez Canal an Syria a slice of the Golan Heights. The UN would have buffer-forces in both places. The Arab members of OPEC were satisfied and lifted the embargo on 17 March.

OPEC
The Organization of Oil Producing Countries (OPEC) became an important international actor, as they describe themselves “OPEC rose to international prominence during this decade, as its Member Countries took control of their domestic petroleum industries and acquired a major say in the pricing of crude oil on world markets. On two occasions, oil prices rose steeply in a volatile market, triggered by the Arab oil embargo in 1973 and the outbreak of the Iranian Revolution in 1979. OPEC broadened its mandate with the first Summit of Heads of State and Government in Algiers in 1975, which addressed the plight of the poorer nations and called for a new era of cooperation in international relations, in the interests of world economic development and stability. This led to the establishment of the OPEC Fund for International Development in 1976. Member Countries embarked on ambitious socio-economic development schemes. Membership grew to 13 by 1975.”

Oregon gasoline station 1973–74.

Sources and more information
http://history.state.gov/milestones/1969-1976/oil-embargo
The Arabs, Eugene Rogan, Basic Books New York 2009, pp. 365-73.
http://global.britannica.com/EBchecked/topic/850856/Yom-Kippur-War#ref1026724
http://global.britannica.com/EBchecked/topic/291225/20th-century-international-relations/32980/Palestinian-terrorism-and-diplomacy
http://en.wikipedia.org/wiki/1973_oil_crisis

I am open to your comments and proposals.

Regards
Bjarte Bjørsvik