>> next on booktv, andrew scott cooper discusses the oil deal made between the ford administration and the saudi government in 1976. an effort to undercut the power of peck. and the impact it had on the shah's regime until iran. this is about an hour. >> good evening and welcome the gerald r. ford presidential library. i am senior declassification archivist. i have the privilege of

introducing andrew scott cooper, author of "the oil kings: how the u.s., iran and saudi arabia changed the balance of power in the middle east." andrew comes to us from new zealand where he's finishing his ph.d. program -- or his ph.d. in american history at victoria university. he also has advanced degrees in journalism and strategic studies and has worked at a human rights investigator and college administrator. in "oil kings," his first book, andrew examines american, iranian and saudi oil policies from 1969 through 1977. during this crucial eight-year period, america went from being the world's largest producer of oil to its largest importer of oil, and saudi arabia supplanted iran as washington's most important islamic ally in the persian gulf. at the center of "oil kings" stands the shah of iran who gambled his country's economic

future on high oil prices and, ultimately, lost his hold on power. andrew has received high marks for his insightful analysis and wide use of original interviews and formerly classified materials as he opens the win toe on this important -- window on this important period in history. in the process he has also produced the most thorough account yet of president ford's handling with relations with the shah, king faisal and oil policy. please join me in welcoming andrew scott cooper. [applause] >> thank you, geir, and thank you to the gerald r. ford presidential library for hosting me and for mistaking my -- making my research and this wonderful event possible. you may have heard the expression it's good to be king. well, tonight it's good to be an

historian with an interest in oil diplomacy and oil fence si. this in this morning "the new york times" published an op sed, and "the wall street journal" published one on the importance of history studies in creating a competitive dynamic work force. our bid tonight seeks to bridge two compelling and vital areas of public interest. it's a rare and wonderful thing for a historian to watch as events that were only speculated about a generation ago finally come to pass more than three decades later. five years ago when i began my research into u.s. oildiplomacy in the 1970s, i was puzzled by references made in documents from 1976 that read like something out of a financial thriller. there was talk of a sudden increase in oil prices triggering a global financial crisis. the bankruptcy of countries in

southern europe, an international debt default crisis, a double dip recession in the united states, unemployment over 9% and the possible collapse of big banks on wall street. 35 years later and here we are; a global recession induced in large part by soaring oil prices, the bankruptcy or near insolvency of countries in southern europe, bank failures and bailouts at home and abroad, the united states economy on the brink of a double dip recession, unemployment over 9%. george santa yang that's warning to future generations is more relevant than ever before, those who cannot remember the past are condemned to repeat it. parallels between the earlier period that is the focus of my research and our own time most vividly during my recent stay in greece where i wrote "the oil

kings." in may 2010, the day after violet protests in athens against the government austerity package, i walked through the center of town past burned-out buildings and vehicles trying to comprehend what had obviously gone so badly wrong for the greek people. it seemed incomprehensible that the same country that had hosted the summer olympic games could have bankrupted itself in the space of just six short years and be at the center of a contagion threatening the survival of european and american banks. during my walk through athens, i wondered why the crisis had spiraled so far beyond the control of any single statesman or international agency. why were our biggest banks so vulnerable to events being played out in a small country in the balkans? how did the regulatory agencies get it so badly wrong? at almost every level, however

one looked at it, the picture resembled an institutional crisis and structural breakdown. then there was the question of leadership. but unlike most analysts, i wasn't thinking about how the current leaders in power in washington, paris, london were reacting to events, i was thinking about another president and another time. i was thinking about gerald ford. in particular, i was thinking about a conversation president ford had in the oval office of the white house in december 1976 with the iranian ambassador to washington. in that conversation president ford explained to the ambassador that he needed the help of the shah of iran to stop opec, the cartel that represented oil producers, from approving another big increase in the price of oil. at that time the shah was this country's most important middle east ally, so much so that the

shah was known by, admired by critics alike as america's shah. opec was due to meet in a few days' time to calculate the size of the price increase for the following year. the shah had made it clear to ford that he believed oil was undervalued in price and that western consumers could afford to pay 15% more for the imports of persian gulf crude oil. he had already brushed aside a letter from ford asking him to rethink his position. the president's meeting with the shah's ambassador was his final attempt to make the iranian leader see reason. that is why i asked you to come in quietly, ford said. i want no confrontation, and that's why this meeting is private. in the meeting the president was joined by alan greenspan who at that time served as chairman of the council of economic advisers. and also by national security adviser brent scowcroft who took notes.

together ford and greenspan tried to convey to the ambassador what they feared might happen, might happen if oil prices went up by 15%. the economies of the western industrialized world were still absorbing the oil shock of three years earlier. many of you remember that time in 1973, oil prices quadrupled, destabilizing the world economy and triggering the deepest recession in the united states. since the 1930s. it put millions of people out of work and caused big corporations like pan am to appeal to the federal goth for bailout -- government for bailout money. in europe at that time, soaring fuel costs had helped drive portugal's economy to the wall and weakened the economies of spain, greece, italy and great britain to the point where the governments were forced to appeal to international lenders for financial lifelines. with the resources of international lending agencies like the international monetary

fund and the world bank all but exhausted, these countries had turned to private banks in the united states to help them meet their internal and external spending obligations and commitments. big banks on wall street including bank of america, citi, chase and morgan had rushed to fill the gap to the point that they were now, in turn, dangerously overextended and vulnerable to a single default somewhere along the line. in a rare moment of candor, at that time morgan's president publicly admitted, quote n a greedy drive for profits american banks in the early 1970s made bad loans and real estate investments and for other questionable purposes. [laughter] see why i love my research? [laughter] wall street was now anxiously awaiting the outcome of the opec meeting that was due in a few days' time after ford's meeting with the ambassador because

everyone understood that another big increase in oil prices might be the trigger for default, contagion and collapse. now, to further complicate matters for president ford at this time, indebted countries in southern europe had only recently drown off the shackles of years -- thrown off the shackles of years of authoritarian rule. they were trying to transition to western-style democracy; this is portugal, spain and greece, while burdened with underperforming economies, soaring levels of inflation and unemployment and political unrest. the ford administration was particularly worried about four nato allies; italy, spain, portugal and great britain. italy's communist party was exploiting economic discontent to try and maneuver its way into a coalition government. britain's government, meanwhile, had warned washington that it was on the verge of running out of cash. if imf turned down its appeal

for another loan, said prime minister callahan, he would have to implement an austerity program so harsh there would be riots in the streets of london. the governments of spain and portugal were effectively broke and in danger of being ousted by extremists. said president ford to the ambassador, the situation in several countries is very serious. any increase in oil prices adds to the danger of a financial crisis to failure in governments, even to the danger of a military crisis. of course, this is in the context of the cold war. how did things get so bad that in december 1976 the president of the united states had to appeal to the ambassador of a developing country to help save the u.s. and western economies and banks from a financial meltdown? well, it turns out that the united states economy had been expected to generate enough growth in the first half of 1976

to pull itself out of recession and lift the economy bees of its allies in its wake. but something happened on the road to economic recovery. eighteen months earlier, the ford administration had disagreed over the size of a federal stimulus spending package. the result was a stimulus that satisfied no one. conservatives opposed stimulus spending in its entirety, and liberals complained that more, not less, was needed. in the event billions of dollars set aside for federal stimulus programs went unspent. in fact, the federal government underspent by an estimated $15 billion which was a huge dollar amount at the time. it reminded some analysts of a previous budgetary miscalculation from 1976 when lyndon johnson's administration underestimated the costs of the vietnam war by $10 billion can and caused a blowout in the federal budget with inflationary results. eleven years later, complained one observer, the federal budget

was, quote n a state of chaos. the shortfall in stimulus spending helped create a condition in which thest economy instead -- the u.s. economy instead of taking off as projected by greenspan and the administration plateaued and paused and appeared headed for a nose dive into a double dip recession into 1977. now, that in turn meant u.s. imports into europe would tail off and put further pressure on already struggling european economies. the second half of 1976 was dubbed the greenspan pause. he gave it that name. alan greenspan was forced to admit that the u.s. economy was not growing as fast as he had assumed it would earlier in the year. in fact, he conceded, it wasn't growing at all, it had paused. it was greenspan who warned the president that the economy was so fragile that even a 15% increase in the price of oil

might be enough to tip the u.s. economy and the economies of its trading partners back into recession with the risk of government failures and bank collapses. in the oval office that day, greenspan explain today the ambassador that oil prices had caused so much chaos that the lending flexibility of big banks had vanishes and financial networks around the world were stretched thin. he added that the huge increase in debts taken on after 1973 when oil consumers had tried to borrow their way out of the fiscal hole they found themselves in had badly shaken the confidence of markets, governments and big business. it was essential, he said, that the shah of iran show restraint on oil prices. when i first read that transcript more than four years ago now and a full year and a half before lehman brothers collapsed, i was, frankly, perplexed. in fact, i could not place the

conversation with any coherent framework because if what i was reading was right, in late 1976 the president was admitting that the u.s. banking system economy and the economies of its european allies was so fragile and so overextended that even a 15% increase in the price of oil could cause panic and bring down the banks and threaten stability of countries in central -- southern europe. so you can ask what did all this have to do with u.s. oil diplomacy with rapp and available what? -- iran and saudi arabia? that was the summit of my research -- subject of my research, after all. i had never heard of a banking scare in 1976 before and certainly had not expected to find one. there's no reference to the episode in the memoirs of former administration officials that i'm aware of. and histories from that period, apparently, make no reference to it, again that i'm aware of. so to try and put the context of the transcript, put it in some

context, i had to broaden the focus of my research well beyond the their owe confines of u.s. oil relations with iran and saudi arabia in the 1970s. i started to look at the whole summit of oil in a much more holistic way by studying the impact rising oil prices had in the 1970s on the economies of countries like the united states, portugal, greece, italy and spain, buttal economies of countries like south vietnam, tanzania, sri lanka, canada and chile. as starting point, i moved my research investigation back in time hoping to locate the moment when it looked to me as though things start today go wrong. the start day, if you will, of the road that led to president ford's confrontation with the shah over oil prices in his final weeks in office. that meant i had to move back in time past the recession, past

watergate, nixon's resignation, beyond the arab oil embargo, the yom kippur war, past the vietnam war, the 1972 presidential election, indeed, back as far as the shah of iran's visit to washington to attend the funeral of former president eisenhower in march of 1969. and that's the point at which my book begins. in the fall of 2008, three years ago now, during the financial collapse i remember watching news foot footage of the failure of lehman brothers and thinking, this sounds familiar. as each month passed and as each phase of the financial crisis gave way to a newer, more ominous one than the last -- and this crisis is still move anything transitory phases now -- i began to wonder if i was watching gerald ford's worst case scenario from 1976 start to play itself out. until that time it hadn't

occurred to me that modern nation states could go bankrupt. individuals can be deplayered bankrupt, but entire countries? i mean, it seemed unfathomable. but there we were, and there they were lined up in a row of dominoes about to fall onto each other; iceland, greece, ireland, portugal, spain and now italy are in trouble. i watched with fascination as financial instability claimed banks and corporations. and then as ford had spoken about in his meeting with the body, the social unrest began. there were riots and disturbances in athens, madrid and london, governments were ousted in iceland, ireland, portugal and britain. and i remember thinking, well, perhaps i could offer some insights, but i was in new zealand at the bottom of the world recovering from spinal surgery, and i thought what could i do? what can you do? can you dial 911 to report a historical emergency?

[laughter] no one's going to listen to me. this raises a big question about the role historians can play in our fast-moving, contemporary society with its fixation on the now and the superficial. during my research for for "thel kings," i interviewed a highly respected washington-based military strategist. i asked him to help explain to me how the united states became so weak in the 1970s in this crucial period with gerald ford as president, and he inherits the situation and has to manage it. and soon my conversation with this individual veered onto other subjects, and inevitably we got into the middle east and the u.s. invasion of iraq in 2003. and i asked him what did he think had gone wrong, where did he think it had all gone wrong. now, he explained to me that usually when there's a foreign policy crisis in washington, the administration office invites in experts in the country or the region that is the summit of dispute.

now, these experts include historians, linguists and cultural and religious study scholars. they're invited to ask and answer questions from officials who are trying to decide the best way to respond to the issue that they're trying to deal with. however, that apparently did not happen in the runup to the invasion of iraq in 2003. historians were not invited to share their views because the administration and office had already decided on a course of action regardless of the facts. that changed, however, in the summer of 2003 when u.s. troops were attacked, and the united nation compound in baghdad was bombed. suddenly, the experts received invitations, we need to talk to you. in other words, the experts weren't called in until the disaster had already started to unfold, and by that time it was too late. this individual told me that he

attended a meeting in which the participants were shocked at the ignorance of the officials who were briefing them. they knew next to nothing about iraq, it makeup or the territorial divisions within the country. and until then they hadn't regarded them as particularly relevant. when we want something to happen so badly that we ignore all evidence to the contrary, we call it magical thinking. and the kind of magical thinking ondisplay over iraq can be seen today in the way we relate to oil. and i'm not referring merely to this country's reliance on foreign supplies of oil, but to the commodity itself which we have allowed to tom mate our lives -- dominate our lives and determine our destinies. if it's not obvious by now, it should be. it's no coincidence that the american century coincided with the age of oil which many experts believe is winding down, the age of oil i'm talking about. from the end of warld war ii

until the mid 1970s, low oil prices made possible the postwar economic miracle that saw the united states enjoy several decades of unpair parallelled economic growth and prosperity. the first evidence of a downside to this codependency, oil and prosperity, came during the first oil shock which is the subject of my book. now, during my research i came across a fascinating memo written by alan greenspan and addressed to nelson rockefeller, president ford's vice president at the time. dated january 1975, greenspan's memo was a well intentioned but remarkably naive appeal to politicians in washington to engage in some straight talk with the american people. in it he explained that rising oil prices had permanently altered the national economy and that there could be no going back to the days of the 1960s when, in his words, the base of our society and the base of our

economy were secure. he continued: now the real world is beginning to press in on the average american and could very well devastate family life and standards of living if we do not confront our longer-term problems and protect the united states from the ever-increasing dangers to which it is becoming exposed. the united states, said greenspan, had to confront its addiction to oil. the immediate problem is oil, although i would list our national defense posture and fiscal erosion as equally critical, he said. it is important for the american people to understand how the oil crisis emerged, what it is and what our potential consequences worldwide if we do not come to grips with it. that was in 1975. thirty-six years later that is a conversation still to be had with the american people. statistics can become mind numbing after a while, but the reality is that this country

consumes more oil than any other, 22% of the world's oil production every year. let's go back to 2005 and the latest phase of the oil pricing roller coaster that we've all been on in recent years. at that time oil prices from 2005 to 2008, oil prices doubled. oil was selling for $75 a barrel in the summer of 2007, shot up as high as $147 a barrel a year later. now, i don't know about you, but to me that sounds hike an oil shock -- like an oil shock, but it wasn't talked about at the time. no one mentioned the phrase "oil shock." oil price increases can be absorbed by consumer economies if they're gradual and moderate. slow increase in the price of oil allow governments, businesses and consumers to adjust their spending patterns or behavior. but sudden spikes in the price of oil can cause real structural damage.

like dr. nourial roubini and professor james hamilton of the university of california in san diego and as a result of my research into the nixon and ford eras, i too believe that soaring oil prices played an important part in overloading the u.s. economy in 2007 and severely destabilizing financial networks and banks. it wasn't the sole cause, it may not have been the biggest cause, but you can't ignore that it was actually one of the causes of this current financial crisis we're all stuck in. oil prices were and continue to be one of the top contributing factors to this crisis, the intensity and duration of this crisis. the parallels with the oil shocks of the mid 1970s are unmistakeable, and i would argue they warrant closer analysis. professor hamilton has drawn a link between the 2007 mortgage foreclosure crisis and high oil

prices. in testimony before the joint economic committee of the congress, he described how $4 a gallon gas prices in 2007 led to a sudden change in consumer spending patterns and that these changes disrupted key economic sectors. he gave the example of the shop for automobiles and auto parts that shave add half a percentage point off gdp between 2007 and 2008. americans, he said, on average bought 140 billion gallons of gasoline a year. so if oil goes up a dollar in price, that means they lost $140 billion in consumer purchasing power. as oil prices rocketed to record highs at that time, incomes fell and jobs were lost as the economy slowed down. intriguingly, professor ham hamn told congress that, quote, we saw the biggest initial declines in house prices and increases in

cling went says in areas farthest from the urban core suggesting an interaction between housing demand and commuting costs. once house prices declined and delinquencies reached a sufficient level, the solvency of key financial institutions came to be doubted. he concluded his testimony with this uncomfortable observation; the reality is that no policy could have prevented a sister-in-law increase in the -- a substantial increase in the price of oil between 2005 and the first part of 2008. now, the point he's making is that the days when this country or any single country could influence or manipulate the world's oil supply and markets are over. the entry of china into the global energy market in the 2000s led to the same tightening of market conditions that we saw when the united states interred the oil market as a -- entered the oil market as a consumer in the early 1970s. it may seem hard to believe, but as late as -- as recently as

1970 the united states was the world's biggest oil producer. now, that quickly changed when oil production in the continental united states reached a peak. at that point the u.s. was forced to compete for foreign-produced oil against its own trading partners in europe and japan. with less spare capacity in the system, the world oil supply became vulnerable to a single intervention or act of god like political unrest, pipeline sabotage and even severe weather conditions in the persian gulf which can lead to loading and shipping disruptions for oil tankers. the economic boom in asia and china over the past decade, especially in the runup to the 2008 beijing olympic games, saw oil prices skyrocket. between 2004 and 2005, the world's oil consumption rose an estimated five million barrels a day. according to dr. roubini, asian economies accounted for 59% of

the growth in demand for oil in 2004. now, when gerald ford was faced with a potentially catastrophic increase in oil prices in 1976, he turn today the saudis for help as every other president has done since that timement on occasion if their own national interests align with those of the united states, the saudis will disregard the rest of the opec cartel, they will breach their production quota, and they will pump enough surplus crude into the system to try and flood the market with cheap oil. flooding the market is supposed to either hold prices in place or force them back down. a flooded oil market offers a respite for recession-battered western economies and takes the strain off badly-overloaded financial networks. so you may ask, why don't we is the saudis to flood the market now? if they're our allies, why don't they step up to the plate? well, they are our allies in

aceps, but it's no longer as simple as that. conditions have changed. in recent years real doubts have emerged in the minds of many analysts about the ability of the saudis to influence the oil markets in the way they used to. we know that in 2008 the saudis did try to flood the market to help the u.s. and its allies, but that their effort to do so in the first half of the year did not take effect quickly enough. and, in fact, by the time oil prices collapsed in the second half of 2008, it was too late to save lehman brothers, and it was too late to take the strain off our financial networks. the damage inflicted on banks and big lenders was too great to be reversed. another concern is the state of saudi oil reserves. now, in february of this year wikileaks revealed that a senior saudi oil company official had tipped off u.s. diplomats in riyadh to the fact that the kingdom's reserves of crude oil may have been overstated by as

much as 30 billion barrels a day, a billion barrels, i'm sorry, or by 40%. 40% of their reserves could be overstated. he said that the saudis had overstated their reserves to encourage foreign investment. he might also have added that the saudis understand their oil reserves are the asset that guarantees u.s. protection and reliance on saw petrol power. you take that away, and what shared interests do the two countries have? not much. for that reason it has always been in the interests of the persian gulf oil producers, especially the saudis, to discourage energy conservation in the united states. and this is done by making sure oil prices don't get so high that they encourage energy efficiency and the development of renewable energy products and resources that might make the u.s. more energy self-sufficient. the u.s. embassy in riyadh cabled washington to say that, quote, our mission now questions

how much the saudis can sub instant i havely influence -- substantively influence the crude markets over the long term. clearly, they can drive prices up if they want to, but we question whether they any longer have the power to drive price down for a prolonged period. then there's the surprising fact that saudi arabia is now the world's 15th largest consumer of primary energy. saudi arabia's population has soared in recent decades, and that in turn has placed great strain on the country's economy and its energy infrastructure. demand for electricity is growing by 10% a year, and saudi arabia will have to double it electricity production in seven years. the saudis are moving forward with plans to produce their own nuclear power by 2020. in the future the saudis will have less oil to ec port. ec port. and finally, the political turmoil in the middle east this year has led king abdullah to

announce more than $150 billion in handouts and welfare subsidies to keep his people happy. let's not forget the $60 billion arms deal the obama administration concluded last year with the saudi arabian government, one of the biggest arms deals in history. the price of the welfare subsidies and new u.s. weapons systems have to be paid for somehow. that can only be done by making sure oil prices stay at a level high enough to cover their cost. and you know what that means, you're going to pay for them. you're going to pay for king abdullah's welfare programs, and you're going to pay for king abdullah's new fighter aircraft and warships of before the unrest in the middle east this year, the saudis calculated that their budget tear needs could be met if oil stayed at or above approximately $68 a barrel. but now according to estimates with all the new, expensive

subsidies and weapons to pay for, the saudi budget will only be balanced the the price of oil is at least $88 this year and $115 by 2015. so you can see the relationship here between arms sales, oil prices, political stability and financial, financial insecurity in a country such as this. i want to bring my remarks to a close by quoting from a recent article in britain's daily telegraph newspaper which warmed my heart. under the headline-grabbing banner, "without history, we have only ignorance." [laughter] columnist jenny mccartney noted that in britain today fewer and fewer school students are taking history as a subject. indeed, she said, they are being active hi discouraged from taking a subject that is perceived to be too hard. history is the most inescapable of summits, wrote mccartney. we inherit it, we make it, and

we are fated to become part of it. in our education system, however, its system -- its study is increasingly neglected. indeed, in a large number of british schools the end of history is already a reality. she goes on to say we cannot elude history, but we ignore it at our peril. cicero argued that to remain ignorant of what occurred before you were born is to remain always a child. government policymakers, the private sector, the media and the public should remember that historians are here to help if called upon. there are important lessons to be drawn from the past, and the information historians gather with the help of institution like this one can be apply today the events of today's world. it might be helpful, for example, if president obama and his top policymakers were aware that gerald ford actually grappled with similar sorts of channels and that 35 years ago

this month this country was faced with a double dip recession, debt defaults, financial contagion and political and social unrest in europe and the middle east. we are watching history play out in realtime. our experiences may be new, but they are not as unique as we like to think they are. they certainly don't warrant another decade of magical thinking. thank you very much. [applause] for the q&a, there's a standing microphone at the back of the room, and if you can get to it, that's where we'd like you to ask the questions. and if you can't get to it, call out the question, i'll repeat it for the audience. yes. >> thank you. i enjoyed that. what do you think would happen politically in the middle east

if for some reason we could stop buying oil from them, if they no longer had the resources and the revenue to subsidize their populations, what would be the effect locally in the middle and globally? >> i think we saw some of that this year. some of the governments have had to pull back on their subsidies. i mean, i think that when the history of our times are written that the arab spring will be connected to the financial collapse of 2007, 2008. i think there's cause and effect there. i think that governments that rule in that particular manner need, well, the subsidies and the handouts to help legitimize their standing with the people, and if they can't pay for them, then they have a crisis of legitimacy. and in iran right now president ahmadinejad, somewhat to his credit, understands that, and i think he's actually trying to reduce the subsidies in iran because he knows that there's a

dangerous relationship there between them. so it'll be interesting to see how it plays out. >> hi. >> hello. >> in the middle 1960s when i was a senior here at the university, i had a good friend from iran. he was a nuclear engineering student, and with the blessings of the united states government, the idea was that if iran could get electricity by nuclear means, that meant they had more oil to sell to us. >> yes. >> at a lower price. so couldn't you say the same thing that you said was driving saudi arabia to pursue a nuclear program would also be the case in iran? >> with iran's nuclear program? >> yes. >> they, the iranians have a much bigger -- 70 million people and a much more industrialized economy, and they, they don't have enough -- i don't think they have enough oil, and they can't generate enough oil

revenues for their future needs. so they would argue that they these the nuclear power to keep their economy going, and i'm glad you brought up the nuclear program because this goes back to 1972. i mean, you say earlier. we know that president nixon and secretary kissinger pledged to the shah that they would sell nuclear power plants and nuclear fuel to iran. and in 1975 the u.s. agreed to sell iran eight nuclear power plants and also offered to build a uranium enrichment facility inside iran. for the rain minneapolis. this stuff is just coming out now, and it's a very interesting part of the equation because in order to really understand what's going on now, we have to kind of put this, put it in a bigger picture, bigger picture, bigger context. >> thank you. >> hi. um, in the late '70s and the early ooh 80s the u.s. began

establishing military basis and central command in saudi arabia and oman and bahrain and such. i was wondering if you could talk more specific chi about sort of the relationship between the oil, you know, oil politics earlier in the '70s to the establishment of central command and also just any secondary sources, you know, history works or political theory works that were important to your research. >> okay. um, i have a bibliography in the back of the book which is quite extensive, and everything's listed there. the question of the bases, you know, the shah was meant to be our gladuater in the gulf. he was meant to do that work so we didn't have to have bases, and that's why the u.s. agreed to lift all restrictions on arms sales to the shah which created its own destructive dynamic after a while. the change came when during the arab oil embargo kingtizal ended up cutting a deal to end the embargo with kissinger in which

the u.s. agreed to help the saudis deal with internal subversion at home and an external subversion and pacify surrounding areas. the terms of that deal are not widely known exactly what they agreed to, promised to each other, but the oil supply was key to that. and then, of course, when the shah was ousted, the u.s. was face with the this catastrophic loss of its power within the persian gulf region. and began concluding military bases because the saudis were perceived as not being strong enough to stand up to a militant iran. >> um, do you think that some to have parallels you talk about are kind of changing today in a world where there's emerging markets in places that are more palatable to the u.s. public such as brazil and canada? >> yeah, it is changing. i mean, oil dependency's gone

down at the moment partly because of the economy. oil usage has gone down and demand has gone down. so when the economy comes back, the fear is that the dependency will go up again because people have short -- we all have short memories. unless our policymakers put policies in place to, you know, build on this current concern in the country over oil dependency. you know, as far as qanta -- canada and south america are concerned, i'll believe it when i see it. shale is extremely expensive. the low-hanging fruit has been picked in terms of oil, and we're now moving into a different and perhaps last phase of the great oil age which is to drill under the antarctic and drill in more difficult places. and the shah predicted this in 1973. he was written off as a crackpot. he gave a famous interview this which he said in 100 years from now this oil business will be

over, and you will be -- you will have to drill under the north pole. you know, he spoke about solar power and wind power and, in fact, he was a visionary on that. >> um, thank you for your remarks. i'm a bit confused about the lessons of history here because the fact is we have an ecological crisis for the use of oil. people have defined the paradigm of energy security in different ways. one way is to simply get more oil, and as you're pointing out, the new oil is more expensive, and it does have ecological costs that are rather severe. the history of dependency of oil in this country is tied into certain very powerful interests in the auto industry, in the oil lobby and oil industrial complex. robert engler in his books outlined that in the early '60s, and that's part of the sustained history. presidents of the united states

have largely accommodated these interests, and there's certainly military interest as you're pointing out ratherrer in a sophisticated fashion or part of the equation. so my question is, you know, how can we respond to this? because now obama at least rhetorically has talked about expanding mass transit, high-speed rail, alternative energy and it seems for different reasons that i think are largely ideological. we don't even have the resources to act proactively. so how, given these different structural forces, do you think the space for interventioning? i mean, what did gerald ford do about these structural forces? >> well, gerald ford was unelected, and he had a short time in the white house, and he was dealing with multiple crises. he turned to the saudis, and they flooded the market in 1977. and as i said, you know, the saudis right now are pumping, pumping more oil than they have in the past 30 years. i think that there's probably been a series of discussions

with this administration about the need to help out the europeans in particular. history is repeating it because policymakers off are working -- often are work anything secrecy, they're often working very quickly and having to make decisions quickly, and they are not able or they don't have that analysis at their hands. or if they do, they're choosing to disregard it. so it's really, it will have to come from a combination of public pressure, public awareness. that means media interest that's very difficult these days or else as oil production plateaus and oil prices rise to $150, $200 a barrel, it's possible the market will take care of it, and we will see these investments in renewable energies just have to come in because people will not be able to, you know, this country will not be able to survive oil prices, another oil

shock of up to $200 a barrel. >> if you could touch on the role of speculation and speculators on oil as well as if we knew all of this was occurring in '73, why wasn't there a move towards some form of mass transit? >> well, there was. this is the period when san francisco's bay area rapid transit comes in. you know, this is a very interesting period, the mid '70s and late '70s because, in fact, people began buying smaller cars. there was, there were great strides made towards energy conservation. ford talked about energy conservation, ford and carter both tried to work on the subject, and carter in particular talked about the need to free ourselves of dependence on this single commodity. but, you know, his message was

not received very far well. very well. and -- [laughter] every president since then has been haunted by the fate of jimmy carter talking about oil and energy self-sufficiency. he, again, like the shah he was probably ahead of his time in that the public was not ready to hear that, certainly he got beat up in the media. he gave that famous speech that some of you will recall called the malaise speech. i don't think the word "malaise" is in that speech. it's the way it was spun after this event. and actually when he gave that speech, his opinion poll ratings shot up. initially, they went right through the roof. and then they fell when there wasn't much follow through. in terms of speculation, i know that there have been ongoing investigations about the role of speculators in the 2007, 2008 oil price spike. um, we just don't know the extent to which that effects the market because right now the

market is affected by so many different variables. you know, and another variable is the fact that the sayties and the iranians see oil as a weapon which is something i argue in the introduction of my book. we see it far commodity. but for the saudis this is a weapon of national defense, and in certain situations offense too. if they can flood the market, they're not just trying to help us, they are taking a financial hit, but it's worth it to them to take a financial hit if they can cause some damage with the iranian economy. and in uniof this year -- june of this year a senior saudi prince who was formerly the head of the security service in saudi arabia gave a speech in britain and amazingly, the remarks of the speech were leaked to british newspapers, and he said the soft spot, the vulnerable area for iran, the iranian regime, is to squeeze its economy, and the way to do that is to deprive it of oil

revenues. >> hello. like, i have a question for you on a recent event in libya, i mean, that continues. >> uh-huh. >> i understand it's only 2% of oil comes from lin ya to the u.s -- libya to the u.s., but is big player in the european market. >> yes. >> and what do you think about recent events and unrest in europe as well? >> well, i think they probably are connected because i'll just consult some statistics here. 85% of living oil export go to europe. and most of those export go to countries like italy, greece and spain. so for greece which is in this terrible situation even today as we know on the news, for them to suddenly, suddenly, you know, living oil was cut off during the fighting, for them to suddenly lose that percent, 15% of their fuel supplies is

particularly problematic from a financial point of view and from a strategic point of view. and there have got to be constitutions going on now with all the governments anxious to get oil flowing into southern europe again to make sure that there's enough, that the demand is met and so you don't see another spike in oil prices. so i think they are, um, i think they're directly related, and i was intrigued that just two weeks ago just before i left new zealand, the british press was reporting that the first oil deals had been struck between british companies that are associated with the british prime minister's, cameron's administration, and the libyan rebels. the libyan rebels need money pretty quickly, too, because they're going to have to build their country up and repair the war damage. but you see this interesting dynamic at play again. and nothing at least for me very few things happen in total

isolation. >> andrew, thank you very much. i enjoyed your talk. i'm juan cole. if blurb for your book promises some insight with regard to the effect to have saudi flooding -- >> yes. >> -- on the islamic revolution in iran, and you didn't quite get around to -- >> yes. >> -- very much of that this evening, so i want to hear that story. [laughter] >> when -- yes, and this is major part of the final part of the book. when the saudis agreed to flood the market in 1977, they cut a deal with the ford administration to -- essentially, break opec from the inside. and they were very concerned, the shah at that time was the dominant power player, broker within opec. and although he was a u.s. ally, as i said, he was resisting u.s. appeals concerning oil prices. so as it was described to me by

the man who dealt with this crisis at the time within the administration, um, the u.s -- the goal of the administration was to break opec without hurting the shah because they were aware even at that stage, early stage that the shah's regime was not as strong as it appeared to be in public. so they made a miscalculation, for sure. they underestimated the severity of the financial problems facing the shah. he needed those oil revenues. he needed the money from that oil price increase that was going to come in 1977. and when the market was flooded, iran was driven out of the market. the saudis not only pumped more money onto the market, they sold their oil at a significant discount to the price offered by the rest of the cartel, including iran. the diaries are quite interesting because there's a moment in january 1977 where the shah says, we're broke.

he had dug himself into a fiscal hole of his own, and he really needed that money so that iran could pay its foreign creditors and also he had his own welfare subsidies to worry about. the iranian people were getting restive, and he had promised that he would -- more housing subsidies, etc., etc. , and he suddenly couldn't pay them. and so in the first nine days of 1977 iran's oil ec port -- iran's oil revenues collapsed by something like 35, 36%. now, they recovered slowly over february, march. and then by that time it was too late, the saudi flood had taken effect, was taking effect. and the shah, it's well documented that the iranian economy suffered severely from this. the shah's government was forced to institute an austerity budget that led to job layoffs in rapp. many of the people who were laid

off were laborers, young men from the rural areas who were more conservative, more religiously inclined. they were working on construction projects around the big cities like tehran, and suddenly they were on the streets unemployed, and they were d they're the kindling for the revolution to come. so this is where policymakers who are working on an issue over here and doing their best, there are causes and consequences of what they're doing over here. and it's very difficult, i think, for policymakers to have their eyes on the ball all the time. but we do know now that our secretary kissinger probably should have spoken up and said more to his colleagues in the administration because he was the one who really understood that the shah's regime was not as strong as it appeared to be. that was a long answer.

>> a great lecture. how would you envision a world without opec, and how would the united states benefit without an to peck existing? >> well, opec is really saudi arabia, and in june there was a split within opec, another split which is quite interesting. once again, the saudis wanted to increase their oil production, the iranians and the rest of the -- a majority of the cartel said, no. the meeting broke up, and the saudis said we're going to pump oil onto the market anyway. so at the moment we're seeing, in some ways, a repeat of 1977. it'll be interesting to see how far they go with it. you know, russia is now a major oil producers. someone just indicated we're seeing countries in south america, you know, discovering new oil deposits. it's, i mean, opec is to the extent what saudi arabia wants it to be, and it's in the interests of the saudis to use

their swing power so that their petro power is the most important force in the oil markets in the world. >> i guess in the interest of full disclosure, i must say that i am an iranian-american. be i've been here 52 years, the last four years of it as a loyal citizen. there is a lot of resentment in this country because of our dependence on the middle east oil. and this is even before 9/11 and the terror and all the problems that we have now. we also resent the fact that the price keeps going up and we are paying a lot for it. i watched a program on the discovery channel that concluded that of the amount that we pay at the pump, let's say $3.40 or

whatever, only a dollar of it does not go to taxes. all the rest is consumed by taxes of one kind or the other. which we impose and we collect, and it is a significant part of our economy. it's a significant part of our revenue. that last dollar pays the -- [inaudible] , the transportation of crude oil, refining it, storing it and distribution of it. i think most people don't know that. now, in your research did you come across anything like that? do you think this is something that people should know about at least? >> well, in the mid '70s, the oil companies that the time were, in fact, concerned by oil prices getting too high because

it was dampening down demand, and so that was hurting their profits. and they, there's a moment where they meet with secretary kissinger in early 1974, and they say to him the shah is the problem, the shah is the one who's raising the price of oil and, please, go and talk to him because -- >> [inaudible] we're talking about taxation of oil. >> yeah, i'm not familiar with that issue, yeah. well, if that's the last question -- is that the last question? oh, one more? okay. >> let's make that the last question. >> yes. >> so sometimes at least it's my understanding that we observe shifts in the crude oil prices and, you know, not necessarily a direct correlation between pump prices. how much of the actual, you know, landed cost to the consumer has to do with the value chain here in america versus the true commodity crude

price? for example, refineries, capacity, distribution -- >> i can't answer that question. i honestly don't know. >> all right. thank you. >> be honest with you on that one. i can answer anything about the history, but that's a technical question. [laughter] [applause] >> is there a nonfiction author or book you'd like to see featured on booktv? send us an e-mail at booktv@cspan.org or tweet us at twitter.com/booktv. >> wednesday on booktv online, watch live streaming coverage of the annual national book awards from new york city, red carpet interviews with the nonfiction finalists and the awards ceremony starting at 6 p.m.