Making Enemies out of Friends

With kind permission from J.W. Smith, a major part of Chapter 14 of The World's Wasted Wealth II (Institute for Economic Democracy, 1994) has been reproduced here. (See the beginning of this chapter if you have not read it.) Also, please note that I do not make any proceeds from the sale of this book in any way.

In 1951, Dr. Mohammed Mossadeq took the reins of power in Iran from the British-backed ruler. Like Vietnamese leaders who wished to copy the U.S. constitution but ended up fighting the United States for their independence, this progressive leader and most literate Iranians viewed

America as a land of wonderful opportunities and wonderful people....[Mossadeq] never became anti-American and continued to believe that the United States was still the only major power capable of making a positive contribution to the reshaping of the world in favor of those nations which had long suffered from European imperialism.18

But European imperialists had destroyed each other's wealth in World War II battling over their empires and, unknown to Middle Eastern societies (or to the American people), U.S. foreign policy was designed to deny independence to any nation that might ally with the East. See footnote 1 For two years Mossadeq held out, while Western oil interests pulled government strings to embargo Iran's oil and deny them funds. During this time, and even with the loss of one hundred thousand jobs in the oil industry due to that embargo, there was a "slight improvement in employment, overall economic production, and balance of trade." In their effort to break the West's embargo, Iran threatened to start trading with the Soviet bloc.19

That was their fatal mistake. The fear that an independent Iran might someday join forces with their Soviet neighbor guided the West's Middle East policies. Instead of using its influence and power to break the chains of British and French colonialism by supporting the budding democracy, the United States joined hands with Britain in the 1953 covert intervention (Operation Ajax) that placed the feudal Shah back in power. Even though this was largely a British MI6 operation, the Americans, in a burst of self-congratulation, openly took credit for it.

With an immediate payment of $45 million (part of an eventual $21 billion), the over-capitalized nations then removed their economic blockade, renewed their aid, and went on to make Iran their Middle East surrogate and regional military power.20 Of course, these billions of dollars' worth of military hardware were bought with Iran's oil. That was not by chance. Later, when OPEC was formed, oil prices started rising and money started moving outside the control of the old power brokers. Just as when Iran declared its independence, the neo-mercantile monopolization was broken at this point and President Nixon's national security advisor, Henry Kissinger, recommended "massive arms sales to Middle East oil states as a way of recycling the petrodollars that were rapidly flowing out of the United States."21

Note how Iran's oil wealth was returned to the centers of capital through arms sales, both when their surrogate, the Shah, was in power and again when the Middle East was temporarily outside their control. This is a crucial aspect of the West's Middle East policies. In spite of the rhetoric of compassion and aid for the world's impoverished, we must remember how-except when allies are needed in balance of power struggles-the owners of capital have always tried to prevent the development or accumulation of competing capital. See footnote 2

The oil money in the Middle East had to be soaked up and returned to the old centers of capital or it would have become another center of capital that could build industry and take over resources and markets.22 As oil sources are limited, the over-capitalized world did not have the option of excluding the entire Middle East from world markets as they had done with Iran and are now (1991-1993) doing with Iraq. If used for both fuel and raw material, the industrial nations' refineries and chemical complexes could never compete with the cheap oil in the Middle East. The developed world was in the position identical to that of the Free Cities of Europe a thousand years ago. If permitted capital, the comparative advantage of the Middle East's raw material and fuel (free flowing oil) would eliminate the current centers of capital as manufacturers (in this case refiners) and marketers of the finished products.

Meanwhile, having tasted freedom, such repressive measures against their sovereignty converted the friendly Iranians, who once looked to America for guidance and support, into deadly enemies. The Ayatollah Khomeini and his Islamic followers overthrew the Shah in 1979 and Muslim fundamentalists gained full control. It was the loss of those oil resources and the potential loss of refineries and markets that dictated Iran be depicted as an enemy to the citizens of the over-capitalized nations. If this had been reversed, the justice of the battle to control one's own wealth would have been obvious to us all - that is to all except the citizens of the other society, who would have heard resounding rhetoric portraying the insurgents as enemies.

All the Middle East is logically one country and is considered so by many Arabs. After all, where would America's wealth be if Mexico set up and controlled governments in Texas and Oklahoma, Japan controlled California, England the northeast, Spain the south, and the rest of the country was divided into small emirates with an elite power structure under external control?


  1. This policy was undertaken under National Security Council Directive 68 (NSC-68) only one year before Iran became free. The CIA admitted in the Church Committee hearings in 1975-76 that under this policy they frequently were orchestrating fifty major covert operations, and thousands of minor ones. In cases like Iran, Chile, Brazil, etc., local governments had reclaiming their wealth from foreign control. Under the cover of NSC-68, CIA overthrow of those governments regained control of that wealth for foreign corporations. Back to text

  2. Instead of buying developed world capital or building industry (capital) for all Arabs, much of this money was deposited in U.S. and European banks and lent to Third World countries. If the Arabs had built industry, their cheaper raw material, fuel, and labor would have assured the capture of much of the current market and destroyed any industry that once serviced that segment of the market.

    Though other excuses have been given or created, this almost certainly would, and did, precipitate an attack to protect the current owners of capital: the Persian Gulf War. Iraq had ambitious development plans and with the control of Kuwaiti oil might have been strong enough to have federated and developed the entire Arab bloc.

    The control of the price of oil by the West since the formation of OPEC has been highly successful. The price of gas in 1950 was about twenty-two cents a gallon. Allowing for inflation, a comparable price when the Persian Gulf crisis arose was officially acknowledged to be two dollars. As it was around $1.24 a gallon both before and after the Persian Gulf crisis, this demonstrates a lowering of the price about 38 percent and the risk of that loss of control was certainly a major factor in the Persian Gulf War.

    There were further reasons for that war, the dominant one being a parallel with losing Iran when its oil labor went on strike. With almost half of Kuwaiti and Saudi Arabian labor being imported (and politically untrustworthy) Palestinians and Yemeni, the risk of the Arabs reclaiming control of their oil (meaning their destiny) was enormous. As the East was now defeated, bringing weapons of mass destruction-nuclear, chemical, and biological-under control was also a very high priority for that war. We can anticipate that this control of military potential will expand to other emerging nations. Back to text

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