Duccio Basosi on David M. Wight’s *Oil Money: Middle East Petrodollars and the Transformation of US Empire, 1967-1988*

In Oil Money, historian David Wight convincingly shows how, between the late 1960s and the late 1980s, “petrodollars” – that is, dollar-denominated revenues from international oil transactions – became a crucial ingredient in the transformation of the modes in which the United States interacted with and exerted its power in the Middle East and North Africa (MENA). In a nutshell, the book’s argument goes like this: from the end of WW2 to the mid-1960s, the US successfully extended its “international empire” into the region, exerting its power both indirectly through its declining British and French imperial partners, and directly via a panoply of means both peaceful and violent, and according to a basic playbook in which “friendly elites received Western military support, aid, revenues and expertise to assist state building projects and secure their regimes in exchange for their commitment to fight communism and supply cheap oil” (p. 11). Despite the usually “cooperative” nature of such arrangements, MENA elites grew more assertive during the 1960s under the pressure of nationalist movements and social demands from below. Thus, the Arab oil exporters and Iran became crucial actors (together with Venezuela) in the creation of an international organization – OPEC – aimed at allowing them to exert greater control on oil prices, and progressively wrested from western corporations the control of their oil industries. These processes laid the bases for the large oil price hikes of the 1970s, which were both a symptom of how dramatically MENA countries’ relations with the United States had changed over a decade, and a challenge in and of itself to the original US “empire”. However, US policymakers skillfully managed the challenge by shifting to a new form of “empire”–this time aimed at ensuring that the monetary flows now accruing to the oil exporters would remain under their control: while oil was no longer “cheap”, from 1974 to the mid-1980s successive US administrations from Nixon to Reagan negotiated over and took advantage of a set of mechanisms for “petrodollar recycling” that directed large portions of the exporters’ revenues to finance the US’s balance of payments, federal budget, arms exporters and private banks. They also helped MENA governments direct some of those moneys toward mutually appreciated destinations, such as the Sadat regime in Egypt (chapter 4) and the anti-communist Mujahedeen in Afghanistan (chapter 10). All in all, a new form of cooperative “empire” was established, though not one without its own weaknesses and problems, as petrodollars fueled economic inequalities and grievances, cultural clashes, and international conflicts. The Iranian revolution and the Iraq-Iran War were, respectively, the most obvious “loss” by the US of a friendly petrodollar-recycling regime and the most obvious case in which petrodollars were used in destructive ways (chapters 8 and 9). The story ends in the late 1980s, after a “countershock” in oil prices had curtailed the exporters’ revenues and brought to an end what Wight plausibly considers “the first petrodollar era”, though the reader is made aware that the latter’s “impacts would continue to shape international relations for the years to come, and [that] its structures would be further replicated during the second petrodollar boom that began in the mid-2000s” (p. 280).

In general, this book is well-researched and engaging. Through its ten chapters, we see US policymakers confronting challenges and changes and adapting creatively to them. An important chapter in the book (chapter 3) is dedicated to showing how the original “petrodollar recycling” schemes took shape in 1974-75: here, the author deftly shows how much of the talk about “private markets” doing the job of automatically “recycling” the petrodollars, a dominant theme under the Ford administration, was pure ideology, while the US government negotiated, threatened, and enticed its interlocutors in Arab capitals and Tehran into making the “right” choices with their newly acquired monetary wealth. Among the main strengths of the book is also its emphasis on how the reality of the new petrodollar-based US “empire” was represented, debated, and constructed in the public sphere, both in the US and in the MENA (chapter 6). The book’s primary sources thus comprise not only US and British diplomatic records, but also movies, novels, and newspapers from both the US and MENA capitals: by coming in touch with this material, the reader understands how, far from being universally accepted, the basic logic of the new “empire”, was constantly the object of contrasting narratives, which in turn contributed to bring about frequent renegotiations and some dramatic reshaping of the petrodollar order itself (most notably that determined by Iran’s post-revolutionary “opt out”). Consistently, by placing an end to the first petrodollar cycle in the late 1980s, Wight also avoids “essentializing” the importance of petrodollars to the US, to the MENA, and to the world economy at large.

Within a broadly positive assessment, I have a few critical remarks, all related to the limited explicit engagement of Oil Money with the existing scholarship on the political economy of petrodollars and other related fields. After all, petrodollars have long been considered to be at the heart of the US’s ability to weather the monetary storms of the 1970s and wield its financial power well beyond the MENA region: Wight hints at this when he tells us that the US “maintained its international empire” and even “augment[ed] the geopolitical power of the US-led alliance”, while also “accommodating the rising power and ambitions of its oil-rich MENA allies” (p. 5). But if the distribution of power in a closed system is a zero-sum game, the reader is led to wonder what other actors, external to the US-MENA nexus, lost the power gained by the US-led alliance (the West Europeans and the non-oil exporters in the developing world are my best candidates, but the book is rather shy on this).

The “empire” itself is somewhat under-theorized: if anything, some MENA states seem to have been able to leave the “empire” relatively freely (Egypt from the 1950s to the 1970s; Libya, Iraq and Iran in the 1970s). One can make the case that would-be reformers like Iran’s Mosaddeq in 1953, and even those who successfully “opted out” of the imperial scheme, ended up confronting US power in its most coercive form (via sanctions or outright military confrontation), and that this likely helped convincing all the others to accept the imperial hierarchy and make the most out of it. As for the crucial “recycling” agreements of 1974-75, Wight rightly notes that US military threats to Saudi Arabia were part of the context in which they took shape (p. 84). Yet, with admittedly little access to the Arab and Iranian governmental archives, the broad claim that throughout most of the second half of the 20^th century MENA governments acted the way they did under the pressure of US power remains at least in part an inductive one. In particular, Wight seems to accept too easily some of the US government’s own rhetoric about the outcomes of its diplomatic and military activities in the MENA as engagements that benefited the non-communist world at large, first by keeping oil “cheap” and then by ensuring global “access” to it. Rhetoric aside, an abundant scholarship has shown both that oil often tends to be in over-supply and that the “Arab oil embargo” of 1973 was somewhat of a flop, which no exporter wanted to re-enact afterwards: the price hike of 1973 and the durability of “high prices” during the decade depended more on OPEC’s pricing decisions than on the Arab countries’ production cuts, which assisted in the short term on the spot market, but were gone by March 1974. Thus, whatever its other consequences, the US “empire” may have been overvalued both in making oil “cheap” in the 1950s and 1960s (even though one can make the case that it made it more difficult for exporters to coordinate in bodies like OPEC), and in ensuring its “regular” flow to the consumers in the 1970s and 1980s (when, if anything, US sanctions made it more difficult for some exporters to supply the market). Some engagement with Robert Vitalis’s Oilcraft would likely have been beneficial here.[1]

Wight also weaves accounts of regional events, for instance the Arab-Israeli wars of 1956 and 1967, the Iranian Revolution, the Iraq-Iran War and the Soviet Afghan War of the 1980s, into his history of petrodollar recycling. These events provide context to his main story. The problem, however, is that the histories of such events have already been told elsewhere in greater detail and with greater analytical insight. While all the relevant bibliography is duly cited in the endnotes, Oil Money never uses such phrases as “as shown by…” or “as documented by…”, so that we are left with accounts of such contextual stories which are necessarily less nuanced, more simplistic, and – unwittingly – more petrodollar-centered than they could or should be.

Something similar occurs on a bigger scale with the main subject of Wight’s work: in the introduction, he devotes a total of seven lines to announce that petrodollars have been dealt with by others before and to claim that his book “seeks to build on the varied insights of these works” (p. 4). But those who have dealt with petrodollars before Oil Money have actually written different things, even coming to wildly different conclusions on many aspects of the story (for one: the respective roles of “states” and “private markets” in the recycling process). One would expect an ambitious work like Oil Money not simply to reference such literature in the endnotes, but to engage with it and state clearly who appears to have been right and who appears to have been wrong based on the new documents and data now available. Not doing that – or not doing that explicitly – may add to the readability of the book, but also risks obscuring the implications of its findings.

This leads me to my final point: had Wight engaged more with the literature, readers would more easily appreciate that this book does not offer an entirely new understanding either of the petrodollar economy or of the US’s “imperial” relations in the MENA, as its introductory pages seem to promise, but rather a sophisticated and well-documented synthesis of a set of arguments that have been around for years in respect to both issues.[2] The paradox is that I find this to be perfectly OK: I confess to feel dizzy when I see that almost every history book published today promises us a revisionist understanding of old problems. Instead, I love it when scholars confirm the findings of others on the basis of new evidence. It provides me with a sense that we can really aspire to know something about the past. Wight’s book is a sound book precisely in that it weaves together the stories of the political economy of the petrodollars and of US power in the MENA, which had so far been told separately, and confirms previous findings concerning both with a wealth of newly available primary sources.

[1] Robert Vitalis, Oilcraft (Stanford: Stanford University Press, 2020)

[2] See, for example, David Spiro, The Hidden Hand of American Hegemony (Ithaca: Cornell University Press, 1998); Robert Vitalis, America’s Kingdom (Stanford: Stanford University Press, 2007); Douglas Little, American Orientalism (Chapel Hill: North Carolina University Press, 2008).