The Oil Kings: How Nixon courted the shah

Using newly declassified documents, Andrew Scott Cooper reveals the truth behind Richard Nixon's fervent courting of Iran's shah in the 1970s.

The Oil Kings by Andrew Scott Cooper, published by Simon and Schuster

Anyone who's ever driven down an American highway, idled in America's city streets surrounded by gas-guzzling SUVs, or shivered in the Arctic-cold air conditioning of a US office building, knows the truth: the United States has an insatiable thirst for oil.

Certainly Iran's shah, Mohammad Reza Pahlavi, understood that need, and for eight years, 1969 to 1977, exploited it, negotiating a series of secret oil-for-arms deals with America's best and brightest.

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The effect was to leave the United States pleading for lower oil prices - and its own economic survival - at the hands of arch rivals Iran and Saudi Arabia.

The Oil Kings: How the US, Iran and Saudi Arabia Changed the Balance of Power in the Middle East looks closely at those deals. Using newly declassified telephone transcripts, cables, policy briefs and extended interviews with ageing officials in the Middle East and Washington, Andrew Scott Cooper (who is an academic based in New Zealand), reveals the frightening truth of the Nixon-Ford administration's fervent courting of the shah.

Forget those smiling White House photo opportunities: the reality is that Washington's mismanagement of its "special relationship" with the shah played a big role in fomenting Iran's 1979 Islamic Revolution, the 1974 oil embargo, and the 1970s near-financial collapse of the developed world.

"My search for understanding," writes Cooper, "uncovered a hidden history of US-Iran-Saudi oil diplomacy from 1969 to 1977, the back story of the crucial eight-year period when the United States went from being the world's number one oil producer to the biggest importer of petroleum, and when Saudi Arabia's House of Saud replaced Iran's Pahlavi king as Washington's indispensable ally in the Gulf."

Cooper's tale begins in 1969 at the funeral of a war hero and former president - Dwight D Eisenhower - where Nixon made his first real acquaintance with the shah. The British were preparing to pull out of the region and Nixon and Henry Kissinger were anxious to secure the oil fields and shipping lanes from Iran's northern neighbour, the Soviet Union.

Vietnam had already "exposed the limitations of US power", Cooper writes, and the Nixon Doctrine required that henceforth only foreign proxies would "guard freedom's forts".

The oil-rich shah allied himself with the West in order to transform Iran into a modern power. That won him attention in Washington, as did his instant accord with Nixon. They were "essentially two lonely and insecure men who found relief in the isolation their high positions afforded", Cooper writes, in one of many asides that make these events accessible and compelling.

By late 1969, Nixon was so friendly with the shah that he had granted the leader his own special oil quota. In exchange, the shah pledged to spend every cent of those additional oil revenues on US military and intelligence hardware. This worried Nixon's aides. "It was one thing to fly the flag for the West," Cooper writes, "another to arm it to face down Iraq, India and regional rebellions, pacifying a vast swath of the Middle East and Indian Ocean. Rearmament on the scale proposed by the shah," Cooper adds, "had the potential to bankrupt Iran."

Still, Nixon persisted, advising Iran's lead diplomat, Ardeshir Zahedi to "tell the shah you can push [us] as much as you want [on oil prices] ..." In short, the shah could "raise oil prices at will and pressure western oil companies and consumers" - all via a back channel implemented without cost assessment or risk analysis. Who cared what happened to the real Iranians not benefiting from oil dollars? The US had its precious outpost in the Middle East.

Yet while decision makers like Kissinger couldn't care (or know) less about economics, others did. "We don't know just how keenly the shah appreciates the limits of financial elasticity," the CIA's Office of National Estimates reported in 1971. The shah, the report warned, was digging himself into a debt and inflationary spiral.

Nixon was as clueless as Kissinger. Nevertheless, the president had chosen his ally in this hunt. Under the administration's "Twin Pillars" policy, US strategy in the Gulf would rest on a strong Iran, while the other oil king, Saudi Arabia, remained in a subservient role.

The book elaborates on what happened next, although no one comes out of this particularly well. The transcripts of the oil deals reveal how Kissinger referred to Nixon as "that drunken lunatic" with "the meatball mind", and how he negotiated a settlement with Iran that cost US oil companies their strategic hold in the Saudi oil industry.

Rigged defence contracts also emerge in these pages, most notably the one fashioned by Nelson Rockefeller, then the governor of New York, who solicited Kissinger's help to save New York-based Grumman Corporation from bankruptcy by pushing the shah to purchase the company's F-14 jet fighter. That deal would help carry New York state for the Nixon-Agnew ticket in the 1972 election. For his part, the shah leapt at the opportunity.

There's more, such as the preparation of military contingency plans - which called for Iran to invade Kuwait and Saudi Arabia - and the war games that were held in the Mojave Desert to prepare for such an eventuality.

Then there are the millions of dollars in kickbacks paid by Grumman and Northrop to "middlemen" in Iran, facilitating all those weapons sales. And the scariest deal of all: Nixon's agreement to sell nuclear power plants and fuel to Iran, with no apparent concern for the wider implications such a transaction might hold.

Add to this the fact that Saudi Arabia, too, became a regional player, in 1973. Angrily responding, with other participants, including Abu Dhabi and Dubai, to Washington's support of Israel, King Faisal cut off oil supplies to the West. The ensuing oil embargo brought painful results: inflation soared by 12 per cent in the US and up to 33 per cent in parts of Europe. "The Saudis are getting heady over the power of oil," James Schlesinger commented at the time; the secretary of defence actually mulled protecting US oil supplies by invading the UAE. "I was prepared to seize Abu Dhabi,' Schlesinger recalled. He envisioned a clean surgical strike to land American troops in the heart of Arab oil country. 'Something small. But nothing big.'"

The shah, too, pulled away from his US allies, to pursue a foreign policy based on independent nationalism and increased oil prices, while continuing to build up his weapons cache. In December 1973, he joined the rest of Opec in more than doubling the oil price.

By then, Iran's economy was out of control. The shah's establishment of a one-party state had removed the facade of a loyal opposition. Iran's economy plummeted as oil production fell, in response to decreased western orders and Washington's first real effort at conservation. The gap between rich and poor in Tehran widened alarmingly; and despite those large oil revenues, most villages still lacked running water and electricity. Young men roamed the streets of south Tehran, unemployed and angry.

The "showdown," Cooper says, began in 1974, as the shah made it clear to the White House that high oil prices were the price of political stability in Iran. At that, even Kissinger's rock-solid support began to falter.

In 1975, Kissinger finally seemed to break his commitment to Tehran, saying the US would use all available means "to prevent strangulation of the industrialised world".

One of those means was to ally with Saudi Arabia against Iran. The Saudis then defied Opec with a lower oil price and flooded the market with cheap crude.

We know, of course, what happened next. In 1974, the Watergate scandal brought Nixon down and the wall of secrecy that surrounded those previously murky oil deals collapsed. On its knees, Tehran begged a $500 million loan from the US that arrived too late; and more and more talk circulated about Ayatollah Khomeini becoming a possible successor to the shah.

Cooper writes of these events with clarity, precision, and revelations that stun, even all these years later. If he's guilty of anything in these pages, it's of overdoing it - using three quotes where one would do, taking readers painfully through day-by-day accounts.

But lovers of history will appreciate the revelatory story he unwinds. It has resonance too in today's era. Indeed, we are reminded of that famous quote about being condemned to repeat the past we cannot remember.

Joan Oleck is a freelance writer based in Brooklyn, New York.