Just for the fun of it... created out of an existing document.
CENTRAL INTELLIGENCE AGENCY
CONFIDENTIAL
THE 1967 OIL SHOCK THAT ALMOST HAPPENED
"Most Americans, including some politicians, diplomats, and economists who should have known better, were unaware that the Arab oil embargo of 1973 was the third imposed by the Arabs in the course of their resistance to Israel.
"The first embargo, imposed during the Suez War of 1956, was against the British and the French as partners in a conspiracy with the Israelis . . .
"The second embargo was imposed in the course of the Six Day War in 1967. This time the embargo was placed on all oil shipments to the United States, Great Britain, and West Germany, all of whom were supposed at the time to be aiding Israel. There was an initial five-day total prohibition of oil pumping and export by all Arab producers beginning June 5, 1967; then there was a subsequent 19-day embargo of shipments to the United States and Britain. This was followed by a selective embargo imposed by a number of the Arab oil producers, which lasted until September 2, 1967 against the United States, Britain, and West Germany.
"The first two embargoes were utterly ineffective because they were not supported by a cut in the productions of Arab oil. . . . Even more important to the failure of the 1967 embargo was the fact that the United States imported very little Arab oil.... The embargo was lifted in November, five months after its imposition."
[Thomas C. Barger, ex-President of the Arabian-American Oil Company (ARAMCO)]
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ARAB ECONOMY, FINANCE, AND OIL MINISTERS’ MEETING (Baghdad, August 15, 1967)
In a crucial meeting which could have affected the international oil outlook for years to come, the Arab Ministerial Conference convened to draw up recommendations on how economic measures could best be used to strengthen the Arab position in the aftermath of the June war. On the meeting’s agenda were four specific plans: (1) Algeria’s proposal that the large Arab financial deposits in Britain and the United States be withdrawn; (2) Iraq's proposal that all Arab oil supplies be cut for a period of three months so as to exhaust Western European stocks; (3) Kuwait's proposal that a joint Arab fund for “‘war and reconstruction” be created, with headquarters in Kuwait and with an initial capitalization of £100 million; and (4) Egypt's proposal for the creation of an Arab petroleum organization along the lines of OPEC. Egypt, a non-OPEC member, had been a major campaigner for the establishment of such an organization.
Once the thorny issue of Yemen was resolved, the major issue facing the Arab states Conference became the oil embargo. On this the ministers remained split. Iraq, demanding that the embargo be continued indefinitely, placed before the conference a proposal which called for a complete stoppage of all Arab oil exports to the West, the nationalization of foreign monopolies, and the withdrawal of Arab funds from Western countries.
The most controversial of these proposals was the Iraqi call for a shutdown in oil exports by all Arab producers for three months, starting September 1, in order to hit Europe’s peak winter demand for fuel. This was to be followed by a selective embargo during which supplies would again flow to “friendly nations” in sufficient quantity to meet their domestic demand. These countries would also have to guarantee that no oil would be re-exported. The plan further called for partial and “phased” nationalization of foreign interests in the Arab oil industry, designed to produce a “catastrophic oil shortage” in the developed countries, which would then be forced to exert pressure on Israel to withdraw. The plan was endorsed by Egypt, Syria, and Algeria, but met with rigid opposition from Saudi Arabia, Kuwait, Libya, Tunisia, Morocco, and the Gulf sheikhdoms.
The conferees recommended that the following resolutions be submitted for final approval to the Arab Summit Conference to be held in Khartoum on August 29, 1967:
1. Petroleum is an effective weapon in the battle, and pumping must be stopped totally, not merely partially, but permanently until the consequences of Israeli aggression have been eliminated.
2. The Arab Summit in discussing this matter should take into consideration the consequences of such a step on Arab states in general and on oil-producing states in particular.
3. Arab oil-producing countries should meet to work out joint plans with regards to the oil embargo.
4. Withdrawal of Arab funds from the US and Britain, with the conversion of these funds into currency other than sterling or dollars.
5. A contraction in the volume of Arab investment abroad and the withdrawal of all investment from the US and Britain.
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King Faisal had made a symbolic attempt to help the Arab cause during the war by declaring an embargo of Saudi oil against the West, but his lifting of the embargo after only one week not only angered Arab radicals but deprived this ultimate Arab weapon of a true test of its potency.
-With enough oil in storage, Europe did not even feel the pinch of the embargo before it was lifted.
-Yet for the United States, J. Cordell Moore, Assistant Secretary of the Interior, stated on June 10, 1967: “If the present shutdown continues for more than a few weeks, a critical transportation and supply problem will develop which cannot be solved by individual efforts of oil companies.”
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WHAT MIGHT HAVE BEEN.
We identified a host of possible consequences.
1-Prolonged disruption of Middle East supplies would have seriously affected countries in the Western Pacific and Southeast Asia which got the bulk of their requirements from the Middle East. In addition, it could have had a “‘creeping effect” on world supplies, resulting in serious shortages over the long term, as the longer it is before normal trading conditions are restored, the greater the tendency to cause economic dislocations in the consuming countries.
2-Should there had been a complete embargo, however, there would indeed be a world oil crisis. The Arab nations account for 21 percent of the world oil production. It is believed that production increases in Iran, the United States, Canada and Latin America could replace only about one-third of that loss. Permanent replacement supplies would take years to develop.
3-And since both Britain and the rest of Western Europe take about two-thirds of their oil from the Arab countries, the effects of a prolonged embargo could be very serious. The gap, in fact, is one that could not possibly be filled in the short run. Of the alternative suppliers, Nigeria is now scarcely more secure than the Middle East. Iran has oil to spare, but will be wary of offending her Russian neighbour. As for Venezuela and the United States—the other big oil producers—the problem is one of pipelines, ports, and ships. These simply do not exist at the present on a scale sufficient to meet Europe's needs, even if the heavy cost in foreign exchange could be met.
4-Also, though the United States got most of its oil from North and South America, a large proportion of the oil used in the Vietnam War came from the Middle East. “About 40 million barrels of oil are needed each year for the war in Vietnam, of which nearly half is from the Arabcountries.” Consequently, the disruption of oil shipments to the United States had serious strategic implications, as it “‘threaten[ed] the broad security interests of the United States.” The US Department of Defense immediately moved to assure sufficient supplies for Vietnam and other installations abroad.
-According to the New York Times of June 11, 1967, the Gulf area accounted for 65 percent of the 120 million barrels the Department of Defense moved annually for Southeast Asia and the Western Pacific. The cost of this supply was nearly $240 million, and the added cost to carry supplies from other sources was estimated at $21 million a month.
- Thomas F. Brady of the New York Times noted: "The only effective pressure the Arab countries could have put on the United States through oil is to halt the oil that goes from the Arab states to Vietnam for the war.
-The United States Navy has a contract to buy Saudi oil from the Arabian American Oil Company at a rate reported to be 100,000 barrels a day. If the Saudi boycott is maintained this oil will have to go to the Far East by longer routes.
We were lucky te Arab states did not grasped in time the impact their oil could have had on our Vietnam operations. In turn, this makes the Army Energy Depot relevant again. Research should be continued.
