Crude World

  What does our desire do to others? In its impact on Iraq, oil was like a volcano that erupted every decade or two with a new cataclysm. Because it can be a hindrance to stand atop the volcano as it erupts, I left Baghdad and found a calmer station a hundred miles away in Najaf, where I could get a different perspective.

  Najaf is home to the tomb of Imam Ali, whom the world’s Shiites regard as the successor to the prophet Mohammed. It is a holy city, and one of the greatest Shiite seminaries is located there, along with some of the faith’s greatest thinkers and leaders. Najaf attracts a stream of pilgrims who visit the gold-domed mosque that contains Imam Ali’s remains, and many of these worshippers bring their dead for burial outside the city. The caskets are carried around the mosque and then taken to Wadi al-Salam, the Valley of Peace, where millions of people were buried.

  Even though Najaf had more dead souls than barrels of crude—the largest reservoirs were hundreds of miles away—it had much to teach about oil’s impact. One of the best classrooms was a small, ramshackle building on an alley near the mosque. I visited several times, and people were always pushing, shouting and pleading to get inside; the guards, who were hard men, let in just a few at a time. After taking off their shoes, the visitors entered a darkened atrium that was like a musty library that had not been dusted for years. It was crowded with clerics and religious students who talked in whispers and smoked Yemeni cigarettes. (American products were haram, forbidden.) Overhead fans creaked and kept the air moving but not fresh or cool. One day I was taken to a small, windowless upstairs room that was furnished with a long-suffering couch and a similarly distressed armchair. I sat on the couch and waited. The religious leader Muqtada al-Sadr would arrive soon, I was told.

  A militiaman’s AK-47 in front of a poster of Muqtada al-Sadr

  There was time to ponder what Iraq’s oil reserves had paid for in the quarter century of Saddam’s rule. It underwrote roads and universities and hospitals, but its nonconcrete legacy was disastrous. Since the 1960s, there had been repression, war, poverty, more war, more repression, more war. Oil creates a particularly volatile type of grievance. It is one thing for people to be poor due to factors beyond a listless government’s control—being landlocked or drought-stricken, for example. It is another thing for poverty to proliferate under a hated regime that plunders or wastes an immense amount of wealth. On the eve of the American invasion, with government institutions discredited and inept, religious figures possessed the preponderance of authority in Iraq. Shiite and Sunni clerics were the answer to the question of where people go for succor, voice and direction if their government fails them for decades and, in the wake of invasion by an army of infidels, ceases to function.

  When the Nigerian state began to collapse on itself in the 1980s, there was little to take its place or shore it up because the country was fractured along hundreds of ethnic and religious lines; low-level anarchy ensued. In Najaf, the collapse of Saddam’s petrostate had created the spectacle of people literally crawling to seek help from religious figures like Muqtada al-Sadr; in Sadr’s office one day, I saw petitioners prostate themselves in front of him, asking for assistance. Sadr was about thirty years old and still a student of the Koran, but his power derived from his revered father, an outspoken grand ayatollah who was murdered in 1999 by presumed Mukhabarat agents.

  The violence that would consume Iraq in its post-Saddam era had already begun in Najaf. As Saddam’s regime fell apart, an exiled Shiite leader, Abdul Majid al-Khoei, was flown into the town by the American military, which hoped to insert a pro-Western voice. When Khoei made his first visit to the tomb of Imam Ali, a crowd chanting Sadr’s name beat, stabbed and shot Khoei to death. One version of events had the crowd dragging him to Sadr’s office a few hundred yards away, where Sadr gave the order for execution, because Khoei’s family was a rival to his own. Among the Shiites, who were the long-repressed majority in a country dominated by its Sunni minority, sorting out the future would not be a peaceful affair. This, too, was a legacy of oil, as I was about to be told.

  Sadr swept into the room with several aides, most as young as he was. Dressed in a black gown and turban, he moved at a forward angle, leaning ahead, as though he was in a hurry or lost in thought or both. There was no shaking of hands, no exchange of pleasantries, no eye contact as he sat in the armchair kept vacant for him. It was as though a dark cloud had moved into the room and sat before me. He nodded at my interpreter in a way that meant, Begin. He showed no emotion aside from graveness, as I had seen him do the day before, while delivering a sermon at the Kufa mosque, where his assassinated father had delivered his sermons. In addition to killing his father, Saddam’s regime had murdered Muqtada’s brothers and a famous uncle, whose body was set on fire after nails had been drilled into his head.

  Sadr had mentioned, at his sermon the day before, that enemies would try to stand in the way of Iraq. I asked whether he had Americans in mind. He didn’t hesitate to say that President Bush wanted to carve up and weaken Iraq, the better to control its oil. “Everyone knows that America is not looking for reforms to unify the country,” Sadr told me. “They will be an enemy to us or, shall we say, they will not be a friend to us. We are looking for a unified Islamic nation, so we think our aim is different than their aim.” This theme became explicit in the years ahead, as crowds carrying Sadr’s portrait marched in Najaf and shouted, “Oh, occupier, our oil is for us, not you.”

  Violence took its inevitable course, as Sunni and Shiite militias fought the American occupiers and fought each other. For some Iraqis who took up arms, oil was not just a nationalist rallying cry but a source of funding for their efforts. About $200 million a year in smuggled oil went into the coffers of militias, according to a U.S. government report, though the actual figure was probably higher. This was done by tapping oil from pipelines (as rebellion-for-profit militias did in Nigeria) or by demanding a cut of the revenues earned by the state oil company. Until the Iraqi army threw it out in 2008, Sadr’s Mehdi militia was in control of Basra, where it received a percentage of the oil that was exported from the local port. Up north, Kurds and Arabs who lived in Kirkuk claimed rights to the giant oil field outside the city; the standoff might well be resolved by force. Even as the anti-American insurgency calmed down in 2009, a new round of oil warfare beckoned.

  Just as America had other concerns when it invaded, Iraqis killed each other for reasons distinct from petroleum. But without a doubt, oil was a violence-inducing intoxicant for the people who lived atop it as well as the foreigners who desired it. The country has too much for its own good. It seems reasonable to consider that the fighting may not stop until the wells run dry.

  Ali al-Naimi is barely five feet tall but can be found in a crowd quite easily, because he is always at its center. Naimi, as you’ll recall, is the minister of oil for the Kingdom of Saudi Arabia, so the center is wherever he places his Guccis. On a warm spring evening in Washington, D.C., he was the easy-to-locate guest of honor at a reception at the Ritz-Carlton hotel, where his welcomers included envoys from America’s financial behemoths. Merrill Lynch sent a representative from its executive suite, as did Morgan Stanley, Exxon, ConocoPhillips, Dyncorp, General Dynamics, U.S. Steel, Chevron, the World Bank, the International Monetary Fund, the Department of State, the Department of the Treasury and the Department of Energy. Almost everyone wore pins of side-by-side Saudi and American flags that were handed out at the door. But it was an evening in which desire mixed with anxiety, like a nineteenth-century ball at which a hundred suitors make flattering compliments to just one belle.

  “We’re trying to get some of that Saudi oil,” I heard one businessman confide to another.

  “It’s hard to get,” the other replied, with adolescent envy.

  Naimi swept into the ballroom a half hour late, his slight runner’s frame giving him a birdlike demeanor. He moved as quickly as the central banker of oil might be allowed to move in such a crowd. Hands were extended and shaken, warm greetin
gs were made, laughs were plentiful even if the joke was not heard and, in general, confidence and confidences were encouraged. Even the highest-ranking executives, feigning incidental interest, tilted their heads to eavesdrop as Naimi hopped past. They listened to his brief speech as though their destiny was being revealed. “We are the biggest exporter of crude oil and the U.S. is the biggest consumer of crude oil,” Naimi began. “That makes for excellent complementarity.” He smiled, cueing polite laughter.

  Naimi was born in 1935 in the desert around Khobar, a small port on the Persian Gulf. He was as unprepared for modernity as Saudi Arabia itself. His parents were Bedouin, and the family migrated endlessly with their sheep and camels. When he began tending his tribe’s livestock, he was told not to wander out of sight of their tents, lest he get lost in the infinite desert. His life was destined to be hard, because well into the twentieth century, the Bedouin suffered the same deprivations as their ancestors centuries earlier. But Naimi had the good fortune to be born around the same time as American geologists began looking for oil in the Saudi desert not far from where his tribe wandered. The discovery of oil showered Saudi Arabia with money, paying for highways and palaces and turning a boy nomad into a globe-trotting minister whose mere words could alter the world’s economy. Oil remade the country, but it could not produce tranquillity.

  The Kingdom Center in Riyadh

  A country’s birth is rarely a peaceful event. It’s often the result of violence, and Saudi Arabia was no exception.

  The country’s founder, Abdul Aziz bin Abdul Rahman bin Faisal al-Saud, after whom it is named, unified his kingdom in 1932, acquiring new territory through military victories and strategic marriages into rival tribes (he had at least seventeen wives and a number of concubines). But within a few years his project was floundering. The king borrowed money from almost every business with funds to spare, and still civil servants were not paid on time. In the Middle East, a king without money is not king for long, so to keep his household and his nation afloat, Ibn Saud, as he is known to westerners, had to take out loans from his personal banker. He finally arranged a more secure lifeline from a distant source—Standard Oil of California, which paid £55,000 in gold for exploration rights. As historian Madawi al-Rasheed has noted, “The oil concession came at a time when the state lurched from one financial crisis to another … [and it] resulted in immediate relief.”

  The exploratory team, led by a geologist named Max Steineke, set up a crude camp near Khobar, sleeping in tents by night and occasionally riding camels by day to survey the desert. The color of their skin was new to the Bedouin, as was the behavior of these interlopers, who started the day not with prayers but, sometimes, with calisthenics. Their searches paid off. In 1938, at an exploratory well known as Dammam 7, the Americans pierced a vast reservoir. After news of the discovery was cabled back to San Francisco, Steineke’s camp was augmented with rudimentary air-conditioning and other amenities that meant the Americans would be staying for a while. A year later, Ibn Saud opened a valve that let the first Saudi oil flow onto a tanker ship, the D.G. Scofield. The future of the country and the planet shifted at that moment, yet few people noticed. The American government did not even have an embassy in Saudi Arabia—its nearest diplomat was in Egypt. The only Americans at the ceremony were oilmen.

  Saudi Arabia was, at the time, one of the poorest nations in the world. Largely illiterate and preindustrial, it had meager exports and minimal relations with the outside world. Ibn Saud rarely ventured outside the country, and hardly any of his few million subjects had done so, except in seasonal migrations with their livestock. The royal court was delighted with its new source of revenue, but there were doubts among the nation’s conservative population, always wary of outsiders. How would their lives be changed by oil? Who would truly benefit from it? One of the best portrayals of this dawn-of-oil era is found in the novels of Abdelrahman Munif, especially Cities of Salt, which begins in an oasis town whose residents do not understand what the white-skinned visitors are looking for. A skeptical tribesman, wary of foreigners who promise wealth for everyone, warns his friends, “What does it concern them if we get rich or stay just as we are? Watch their eyes, watch what they do and say. They’re devils, no one can trust them.”

  Through the 1950s and 1960s, the American-Saudi relationship remained cozy and sleepy. The extraction of oil rose gradually, under the control of Aramco, a consortium of American companies led by the very fortunate Standard Oil of California (now known as Chevron). With oil costing two or three dollars a barrel, Saudi Arabia had a steady but not extravagant stream of revenue. Its oil was not even needed by the United States, which was, until the 1950s, a net exporter of oil. But as America’s economy expanded in the 1960s, along with its oil-intensive culture of cars and suburbs, the once-vigorous fields of Texas, Oklahoma and Louisiana were being depleted. By the early 1970s, American production had peaked and the country was importing one-third of the petroleum it consumed. The little-noted shift that had begun when Ibn Saud loosed the first shipment of Saudi oil onto world markets was now going to be felt by the entire world.

  The Saudis and their allies in OPEC realized that their customers could be made to pay far more for the oil their economies were addicted to. In 1973, the colonial era of oil, in which American and European companies controlled pricing and distribution, came to an end. When the Yom Kippur War broke out in October and America provided weapons to Israel, Arab members of OPEC boycotted shipments to America. Prices soared instantly. The reversal was celebrated by Sheikh Ahmed Zaki Yamani, the Saudi oil minister at the time. “The moment has come,” he exulted. “We are masters of our own commodity.”

  This was only partly true. The royal family might be the master of the country’s oil, but not of the alienation it fomented.

  In today’s agricultural and industrial economies, the government does not tend to own every ear of corn that comes from a farm or every slab of steel that rolls off a factory line. Yes, some land and factories might be state-owned, but even in those cases there are usually large numbers of workers and managers involved in the creation of this wealth who care about what happens to the products they have made, and whose salaries come out of the revenues gained by selling them. Other inputs must be paid for—fertilizer, seeds, furnaces, delivery trucks and so on. That is why diverse economies with labor-intensive sectors (whether agricultural or industrial) are healthier over the long term than ones that depend on a single resource or industry: they generate jobs, they are not tossed up or down by inevitable price swings for a particular commodity or product, and the national treasury is not a bulging piggy bank from which princes can take as they wish.

  Oil offers another paradigm. In most countries, oil is not owned by the person who lives atop it. (The United States is one of the handful of countries where property rights extend below the earth.) And unlike the farming of wheat or manufacturing of cars, relatively little labor is required to get oil out of the ground, particularly in the Middle East, where the reservoirs tend to be large and close to the surface. This means that an enormous amount of money that flows into the state’s hands has no owner or benefactor other than the state. A king or prince who pilfers tax funds is taking cash from his people’s pockets, and they will notice. Oil revenues are not squeezed from individuals, as taxes are, and the financial complexity of oil contracts and oil sales allows ample opportunities for theft. The scholars Terry Lynn Karl and Ian Gary noted in a coauthored study that “petrodollars actually sever the very link between people and their government that is the essence of popular control.” This is an origin of the House of Saud’s moral downfall.

  Before the oil rush, the monarchy was known for piety and thrift under Ibn Saud, who lived in a modest palace made of mud bricks. He was not in it for the money or the easy living. He died in 1953 and was succeeded by a son whose immodest ways included throwing money from the window of his royal sedan and watching as his destitute subjects grabbed the riyals fluttering in t
he air. He was nudged aside by siblings concerned that the monarchy would be destroyed by his rule. But the genie was well out of the bottle. The heirs of Ibn Saud, who had at least forty-five sons and some two hundred daughters, allotted themselves sizable allowances from the nation’s oil revenues. The phrase “Saudi prince” became a synonym for fantastic riches. Long before Hollywood A-listers could afford private jets, Saudi royals rented out entire floors of luxury hotels in Switzerland and arrived in silver-plated Boeings; King Fahd, who ruled from 1982 to 2005, reportedly had a fountain in his 747. Saudi royalty all but created the spectacle of “the entourage.”

  There were two ways of drilling into the public till to fund lavish lifestyles. First, there were direct allowances to royals; the amounts have never been divulged but are regarded as substantial, because palaces cannot be built cheaply. Princes who wanted even more cash used their royal status to win contracts and commissions on government deals. For example, a prince who was a longtime defense minister was famous for the cuts he demanded from foreign companies that wished to sell weapons to the kingdom. Decades ago, an elegant portrait of these inelegant affairs was crafted by William Morris, Britain’s ambassador to Saudi Arabia. In cables that were unsealed just a few years ago, Morris described Saudi commerce as “a jungle inhabited by beasts of prey in which one must move with caution and uncertainty.” He wrote in another dispatch, “What they do with the wealth is often comedy and sometimes farce … the theatre of the absurd is never far away. … The sheer effrontery is breathtaking of a prince who will keep on talking about rights and wrongs when you know (and he probably knows that you know) that his cut may be 20 percent of the contract price.”