Thursday, January 7, 2010

The Oil and Money Straitjacket

David Holden and Richard Johns, in their 1981 book ‘The House of Saud: 'The Rise and Rule of the Most Powerful Dynasty in the Arab World’ describe how Saudi oil money was used to hire American firms to industrialise Saudi Arabia with the overall management and fiscal responsibility delegated to the US Department of Treasury. The commission so set up was “independent to the extreme”. “Ultimately, it would spend billions of dollars over a period of more than twenty-five years, with virtually no congressional oversight. Because no US funding was involved, Congress had no authority in the matter, despite Treasury’s role. ”[1]

I wonder how effective monetary policy could be in the US under such a large and secret money regime?

David Holden was murdered in Egypt in December, 1977, while his and Johns’ book was still a work in progress. “Some say that Holden pried too deeply, and that is why he was murdered, others ascribe his death to a case of mistaken identity; almost certainly the truth will never be known.” [2]

A reviewer of Holden and Johns’ work noted that there are “some wonderful nuggets of insight [that are] not discussed in other books. For example a quote from Kissinger's own doctoral dissertation:
"... not shy away from duplicity, cynicism or unscrupulousness, all of which are acceptable tools of statecraft." (p 348)

and, after the death of King Faisal, a quote from the Washington Post:
"[King] Faisal probably did more damage to the West than any other single man since Adolf Hitler." (p382)

Why was the Washington Post so against Faisal?

As it turned out this Saudi Arabian leader was assassinated in March 1975. The timing is interesting. It was only two days before Faisal’s death that the former left-wing Australian Deputy Prime Minister (Jim Cairns) and Australian Senator Wreidt met him in order to negotiate a very large loan for Australia to fully develop its domestic energy infrastructure. This included moves toward the use of solar energy. King Faisal assured Cairns and Wreidt at the time of “the fullest possible cooperation of Saudi Arabia about oil, food and monetary or investment matters.” Cairns believed “it was possible for large sums of money to have been borrowed at far lower rates of interest than would have had to be paid in Australia, and perhaps elsewhere.” [3]

Cairns noted that “the death of King Faisal and later the disarray of the Australian government prevented any progress in 1975. That was the year many Australians point to a coup against Australia’s last social democratic Labor government having occurred with American CIA involvement. [4] Jim Cairns was removed from the office of Treasurer by the then Prime Minister Gough Whitlam after the mainstream newspapers in Australia (virtually then under the control of only three families – Murdoch, Fairfax and Packer) engaged in a campaign attacking the credentials of Cairns. The Melbourne Age, for instance featured banner headlines claiming a member of Cairns family was to get $600,000. Cairns wrote: “It was never possible for anyone to get one cent as a result of anything I, or the government, or any member of it did or did not do.” [5]

Cairns was aware that the aim of the USA at the time was take control of the distribution of oil funds in international financial markets “rather than be lent directly, especially in government to government loans”. “In Washington in October, 1974, OPEC was anathema. If there were to be any ‘cartels they had to be American controlled.”. Cairns added:
“I got the impression, both in Washington and New York, of confidence that oil pressures could be successfully resisted without any military action [6], and that American financial houses could soon regain control of the investment of oil funds.”[7]

And so they did. Wall Street banks monopolized the recycling of petrodollars and the US government acquiesced in vastly inflationary oil price rises in order (at least partially) to bail out its defence contractors. In Australia it was the end of an era. After a relentless oligopoly media campaign, on 11th November 1975 the ‘bunyip aristocracy’ of the Liberal-Country Party coalition came to power in Australia under Malcolm Fraser. It was constantly referred to in Australian corporate media as a ‘landslide’ defeat for Labor, but the party acquired 43.8 percent of the votes – even with the incessant anti-labor campaign – and received only 28 percent of the seats. Cairns thoughtfully wrote in 1976 that such an outcome “may have brought the end of the apparent two-party system.”[8] He was right.

“The strait-jacket was there, and it proved to be one made of money.” [9]...and oil.

[1] [1] David Holden and Richard Johns, ‘The House of Saud: The Rise and Rule of the Most Powerful Dynasty in the Arab World (New York: Holt Rinehart and Winton, 1981), p359. As quoted in ‘Confessions of an Economic Hitman’ by John Perkins. Page 84. Published by Ebury Press Random House, 20 Vauxhall Bridge Road, London SWIV 2SA. 2005. ISBN 978091909109

[2] John P Jones III (reviewer of Holden and Johns book at Amazon).

[3] Jim Cairns ‘Oil in Troubled Waters’1976. Widescope International Publishers, Victoria, Australia. Page 92

[4] A Coup in Australia and the CIA
Brenda Rosser. Saturday, July 5, 2008

[5] Jim Cairns ‘Oil in Troubled Waters’ 1976. Widescope International Publishers, Victoria, Australia. Page 92

[6] Jim Cairns ‘Oil in Troubled Waters’ 1976. Widescope International Publishers, Victoria, Australia. Page 82

[7] Jim Cairns wrote: “On January 3, 1975, Dr Kissinger, American Secretary of State, indicated that in some circumstances a ‘takeover of Arab oilfields was a possibility’, not because the cost of fuel had quadrupled, but that it would be ‘another matter where there was some actual strangulation of the industrialized world.’ At about the same time Professor Robert Tucker of John Hopkins University had issued a paper settling out the pros and cons of an American seizure of parts of Kuwait and Qatar. He believed that even if the Arabs set fire to the oil wells it would take only a few months to have the oil flowing freely again. He was satisfied that Russia would not intervene.” Jim Cairns ‘Oil in Troubled Waters’ 1976. Widescope International Publishers, Victoria, Australia. Page 79

[8] Jim Cairns ‘Oil in Troubled Waters’ 1976. Widescope International Publishers, Victoria, Australia. Page 129

[9] Jim Cairns ‘Oil in Troubled Waters’ 1976. Widescope International Publishers, Victoria, Australia. Page 130.


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Regarding the death of King Faisal, whose face is on all the money of the country except for the one riyal note, where his father the founder of the Kingdom, Abdulaziz is. Faisal was the smartest of his 43 sons and at age 16 was his representative at Versailles, effectively his foreign minister. One of Faisal's sons, Sa'ud, has been foreign minister since not too long after the assassination of Faisal.

Faisal was assassinated by a crazed nephew gone religious fanatic (with 42 brothers he had a lot of nephews). This nephew had spent time in Berkeley going to UCB there and was quite dissolute by all accounts, wine, women, and song, etc. Upon returning to Saudi Arabia later he went through a conversion and became upset about certain decisions of his uncle that would later be the basis for an uprising by ultra-fundamentalist tribals in 1979 who seized the Grand Mosque in Mecca: that showing sports on TV was allowed, that Shi'a were being allowed to have jobs, and that women were allowed to go to school. The nephew walked into a majlis held by Faisal and pulled out a gun and shot him and then shot himself.

BTW, by all accounts Faisal was completely uncorruptible, unlike most of his brothers, and he also came from the family that provided the traditional religious leadership of the country, the al-Sheikhs, descended from Mohammed al-Wah'hab whose alliance with the original Sa'ud in 1740 from whom the al-Sa'ud family takes its name was the beginning of what would later become the country. Wah'hab advocated imposition of the ultra-strict Hanbali Sunni law code, and adocacy of this became the ideology of the family. They have continued to spread what is now called "Wah'habism" and since 1973 with strong funding, including madrassas in Pakistan and Afghanistan. One of the things the Taliban did when they took over in Afghanistan was to substitue the Hanbali law code for the much more liberal Hanafi one.

Brenda Rosser said...

Thanks for this background info, Barkley.

I've read that King Faisal had been protected by an elite guard trained by a private econtractor selected by the United States Department of Defense.

His death occurred just at the time the US was claimed to be attempting to re-establish their global financial cartel and Australia was seeking to buy out foreign corporate ownership of its energy resources (and further develop them). “Prince Faisal Bin Musad (Faisal’s assassin) had just returned from the US and was captured directly after the attack and declared officially insane. He was later found guilty of regicide and in June 1975 he was beheaded.”

A very quick beheading. No time for a proper interrogation it seems.