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A Century of War - Anglo-American Oil Politics and the New World Order
The Dollar Standard, Big Oil and the New York Banks Anglo-American petroleum interests emerged from the Second World War in a position enormously more powerful. In the final agreement for postwar New World order in monetary and economic affairs, hammered out between British and American negotiators in 1944 at Bretton Woods, New Hampshire, Anglo-American hegemony over world petroleum played a central role in the thinking of Lord Keynes and his American counterpart, assistant US Treasury Secretary Harry Dexter White. The Bretton Woods system was built around the "three pillars" of an International Monetary Fund, whose member country contributions would constitute an emergency reserve available in times of balance of payment distress; a World Bank, which would loan to member governments for large public projects; and the General Agreement on Tariffs and Trade (GATT), designed to create a managed agenda of "free trade." Lord Keynes and his American counterparts skillfully designed certain clauses to insure a postwar Anglo-American hegemony over world monetary and trade affairs. First, de facto voting control was given to United States and Britain within the IMF and World Bank. Second, Bretton Woods created what was called a Gold Exchange System. Under this system, each member country's national currency was pegged to the US dollar. The US dollar, in turn, was set at an official rate of $35 per fine ounce of gold, the rates set by President Roosevelt in 1934, during the depths of the Great Depression, and before a world war. Because the New York Federal Reserve Bank had accumulated the bulk of the world's official gold reserves during the war, and because the Dollar emerged from the ravages of the war as the world's strongest currency, backed by what was unquestionably the world's strongest economy, few were in a position to argue with what amounted to a postwar US Dollar Standard. Among those least inclined to complain about the terms of the Bretton Woods monetary order, were the large American petroleum companies, the Rockefeller companies of the Standard Oil group, together with the Pittsburgh Mellon family's Gulf Oil. They had secured a major stake in concessions for oil in the Middle East, above all in Saudi Arabia. Partly through the clever diplomacy of President Roosevelt and the bungling of Britain's Winston Churchill, Saudi Arabia slipped from the British grip during the war. Saudi King Abdul Aziz gained an unprecedented Lend-Lease agreement in 1943 from Roosevelt, a gesture to insure Saudi goodwill to American oil interests after the war. Roosevelt acted on advice of Harold Ickes, then Petroleum Coordinator for National Defense, and a State Department which in December 1942 had noted, "It is our strong belief that the development of Saudi Arabian petroleum resources should be viewed in the light of the broad national interest." This was the first time American national security had been officially linked with the fate of the desert kingdom war than 10,000 miles from its shores on the Persian Gulf. It was not to be the last time. State Department planners realized that the implication was that US foreign policy, at least in key areas, my become or imperial, along British lines of controlling strategic interests in lands far from its shores, as the pillar of its postwar power. In the first years after the end of the Second World War, few other Americans realize the implications. They were far too preoccupied with returning to normal life after depression and war.
Marshall Plan forms postwar oil hegemony Little attention has been paid to some details of the postwar European Recovery Program, the Marshall Plan, named after its architect, Secretary of State George C. Marshall. From its inception in 1947, the largest single expenditure by ERP recipient countries in Western Europe, was to use Marshall Plan dollars to purchase oil, oil supplied by primarily American oil companies. According to official records of the State Department, more than 10% of all US Marshall Plan aid went to buy American oil. By the end of the war, the US oil industry had become every bit as international as its British counterpart. Its main resources were in Venezuela, the Middle East and other faraway places. After the war, Big Oil, as the five US companies were called -- Standard Oil of New Jersey (Exxon), Socony-Vacuum Oil (Mobil), Standard Oil of California (Chevron), Texaco, and Gulf Oil -- moved to take decisive control of Europe's postwar petroleum markets. The ravages of war severely affected European dependence on coal as the primary energy source. Germany had lost her eastern coal reserves, and coal output in the war-torn west was only 40% of prewar levels. British coal output was 20% below the level of 1938. The oil of eastern Europe was behind what Churchill called the Iron Curtain, inaccessible to the west. In 1947, half of all Western Europe's oil was being supplied by the five American companies. The American oil majors did not hesitate to take advantage of this remarkable opportunity. Despite some Congressional inquiry and mid-level bureaucratic protest at the obvious misuse of Marshall plan funds, the American oil majors forced Europe to pay a dear price, a very dear price. They more than doubled the price they charged European customers between 1945 and 1948, going from $1.05/barrel to $2.22/barrel. Although the oil was supplied from inexpensive Middle East reserves of the US companies, the freight rates were calculated in a deliberately complex formula, tied to freight rates from the Caribbean to Europe, a far higher cost. Even within European markets, there were staggering cost differences. Greece was forced to pay $8.30/ton for fuel oil, the same fuel oil for which Britain paid only $3.95/ton. Furthermore, the US companies, with support of the Washington government, refused to allow Marshall Plan dollars to be used to build indigenous European refining capacity, further tightening the stranglehold of American Big Oil on postwar Europe. As the two major British oil companies, Anglo-Persian and Shell, recovered their capacities, the American five were forced to expand to seven companies, parceling out the oil markets of postwar Europe and the rest of the world. By the 1950s, the position of Anglo-American oil companies appeared unassailable. They controlled incredibly cheap Middle eastern supplies, and captive markets in Europe, Asia, Latin America, and North America. The price of petroleum seemed a constant of daily life during the 1950s. The companies reaped enormous profit for their dollar sales of oil to the new world market. The automobile and its associated industries had become the single largest component of the American economy. US tax dollars poured billions in the construction of a national modern highway infrastructure under the Eisenhower National Defense Highway Act, using the pretext that fast motor ways were required to flee cities in event of nuclear war with the Soviet Union. The railroad infrastructure was neglected and allow to decay to the advantage of far less energy-efficient motor transport. This was the time when a Secretary of Defense, Charles Wilson, former chairman of a major Detroit automobile corporation, could say without flinching, "what's good for General Motors is good for America." He should have added, good as well for Exxon, Texaco and the oil majors. Oil had become the most important commodity to fuel the economy.
The power of New York banks tied to US oil A little-noted consequence of this extraordinary global market grab by the major American oil companies following the Second World War, was the parallel rise of New York oil-linked banking groups tied to oil to international dominance. Since the period of the Dawes reparations loans and related lending of the 1920s, New York banks had increasingly oriented their business to the international arena, away from domestic finance. As US petroleum companies became an ever larger element in international oil supplied during World War II, New York banks benefited from the capital inflows of world oil trade. The powerful New York banks exerted influence to modify the original Bretton Woods scheme devised by Keynes and Dexter White to preserve this advantage. During the early 1950s, a wave of little-noted New York bank mergers contributed to increasing the already enormous political and financial influence of the New York banks over domestic US policy. In 1955, Rockefellers Chase National Bank merged with the Bank of Manhattan and the Bronx County Trust to create the Chase Manhattan Bank. The National City Bank of New York, also closely tied to the international operations of the Standard Oil group, like Chase, acquired the First National Bank of New York to form the First National City Bank, later Citibank Corp. Bankers' Trust took over the Public Bank & Trust, Title Guarantee & Trust and several other regional banks to form another powerful group, while the Chemical Bank & Trust the merged with the Corn Exchange Bank and the New York Trust Co. to form New York's third-largest bank group, Chemical Bank New York Trust, also tied to Standard Oil. J.P. Morgan & Co. merged in the same time with Guaranty Trust Co. to form Morgan Guaranty Trust Co., the fifth-largest bank. The net effect of this postwar cartelization of American banking and financial power into the tiny handful of banks in New York, strongly oriented to the fortunes of international petroleum markets and policy, had enormous consequences for the following three decades of American financial history, overshadowing all other policy influences in US and international policy, with the possible exception of the Vietnam War deficit-financing. New York banking had traditionally oriented abroad, but now it concentrated disproportionate power over world finance, unlike ever before. It resembled the power of the old London imperial banking groups such as Midland Bank, Barclays, and the like. By 1961, the deposits concentrated into the five largest New York banks were fully 75% of all bank deposits of the entire metropolitan region, America's largest economic region. The membership of the increasingly-influential New York Council on Foreign Relations during the 1950s also reflected this concentration of financial and economic power. The CFR chairman was Wall Street lawyer John J. McCloy, also chairman of Chase Bank and a former lawyer for the Rockefeller Standard Oil interests. While most Americans only dimly realized the ominous implications of the concentration of economic and financial power into a small number of hands in New York banking, corporations and related law firms during the early postwar years in the 1950s, the point was not lost on the English cousins in the City of London. American society was increasingly reshaped along the lines of British "informal empire," with finance, raw materials control, and control of international terms of trade, rather than the traditional American foundation of technological and industrial progress. --
Chapter 9, "Running the world economy in reverse -- Who really made the 1970�s oil shocks?" pages 145-165 (complete but without footnotes) By 1969, at the end of President Richard Nixon's first year in office, the US economy was again in recession. US interest rates were sharply lowered by 1970 in order to combat the downturn. Speculative "hot money" began to leave the dollar in record amounts once more, because of the falling interest rates. Higher short-term profits were harvested in Europe and elsewhere. One result of the almost decade-long American refusal to devalue the dollar, and her reluctance to take serious action to control the huge unregulated Eurodollar market, was increasingly unstable short-term currency speculation. As most of the world's bankers well knew, King Canute could pretend to hold the waves back for only so long. Richard Nixon turned to an expansionary domestic US monetary policy in 1970. As a result, the capital inflows of the previous year reversed, and the US incurred a net capital outflow of $6.5 billions. But, the US recession persisted. Interest rates continue to drop into 1971, and money supply continue to expand. Capital outflows reached immense dimensions, for that time, totaling $20 billions. In May of 1971, the United States recorded its first monthly trade deficit as well. That triggered a virtually international panic sell-off of US dollars. The situation was, indeed, becoming desperate. By 1971, US official gold reserves represented less than one quarter of her official liabilities: theoretically, if all foreign dollar holders demanded gold instead, Washington would have been unable to comply without drastic measures. The Wall Street establishment persuaded President Nixon to abandon fruitless efforts to support the dollar against the flood of international demand to redeem for gold. But, unfortunately, they did not want the required dollar devaluation against gold which had been intensely sought for almost a decade. On August 15, 1971, Nixon took the advice of a close circle of key advisers which included his chief Budget adviser, George Shultz, and a policy group then at the Treasury Department, which included Paul Volcker and Jack F. Bennett. Bennett later went on to become a director of Exxon. That sunny quiet August day, the president of the United States announced a move which rocked the world: formal suspension of dollar convertibility into gold, effectively putting the world completely onto a direct dollar-standard, with no gold backing. By doing this, the US unilaterally ripped the central provision of the 1944 Bretton Woods system apart. Foreign holders of US dollars could no longer redeem their paper for US gold reserves. Nixon's unilateral action was reaffirmed in protracted international talks that December in Washington between the leading European governments, Japan, and a few others. The result was a bad compromise known as the Smithsonian Agreement. With an exaggeration which exceeded even that of his predecessor, Lyndon Johnson, after the Smithsonian talks, Nixon announced that they were, "the conclusion of the most significant monetary agreement in the history of the world." The US formally devalued the dollar a mere 8% against gold, placing gold at $38/fine ounce instead of the long-standing $35, hardly the 100% devaluation being asked by allied countries. The agreement also officially permitted a band of currency value fluctuation of 2.25% instead of the original 1% of the IMF Bretton Woods rules. By declaring to world dollar holders that their paper would no longer be redeemed for gold, Nixon "pulled the plug" on the world economy, setting a series of events into motion which would rock the world as never before. Confidence in the Smithsonian agreement began to collapse within weeks. De Gaulle's defiance of Washington in April 1968 on the issue of gold, and his adherence to the rules of Bretton Woods, was not sufficient to force through the badly needed reordering of the international monetary system; but it had sufficiently poisoned the well of Washington's ill-conceived IMF Special Drawing Rights scheme to cover over the problems of the dollar. The suspension of gold redemption, and the resulting international "floating exchange rates" of the early 1970s, solved nothing. It only bought time. An eminently workable solution would have been for the US to set the dollar to a more realistic level. From France, de Gaulle's former economic adviser, Jacques Rueff, continue to plead for a $70/oz. gold price, instead of the $35 level which the US unsuccessfully defended. This would calm world speculation and allow the US to redeem her destabilizing Eurodollar balances abroad, without plunging the domestic US economy into severe chaos, Rueff argued. If it was done right, it could have given a tremendous spur to US industry, since its exports would cost less in foreign currency. American industrial interests would again have predominated over financial voices in US policy circles. But reason did not prevail. The Wall Street rationale was that the power of its financial domain must be untouched, even if at the expense of economic production or American national prosperity. Gold itself has little intrinsic value. It has certain industrial uses. Historically, because of its scarcity, it has served as a standard of value against which different nations have fixed the terms of their trade and therefore their currencies. When Nixon decided to no longer honor US currency obligations in gold, he opened the floodgates to a worldwide Las Vegas-speculation binge of a dimension never before experienced in history. Instead of calibrating long-term economic affairs to fixed standards of exchange, after August 1971 world trade was simply another arena of speculation on which direction various currencies would fluctuate. The real architects of the Nixon strategy were in the influential City of London merchant banks. Sir Siegmund Warburg, Edmond de Rothschild, Jocelyn Hambro, and others saw a golden opportunity in Nixon's dissolution of the Bretton Woods gold standard that summer of 1971. London was once again to become a major center of world finance, and again on "borrowed money," this time American Eurodollars. After August 1971, dominant US policy under White House National Security Adviser Henry A. Kissinger was to control, not to develop, economies throughout the world. US policy officials probably began calling themselves "neo-Malthusians." Population reduction in developing nations, rather than technology transfer and industrial growth strategies, became the dominating priority during the 1970s, yet another throwback to nineteenth-century British colonial thinking. We shall soon see how this transformation took place. The ineffective basis of the Smithsonian Agreement led to further deterioration in 1972. Massive capital flows again left the dollar for Japan and Europe, until February 12, 1973, when Nixon finally announced a second devaluation of the dollar, of 10% against gold. That set the gold price where remains to this day for the Federal Reserve, at $42.22/ounce. At this point, all the major currencies begin a process called the "managed float." Between February and March of 1973, the value of the US dollar dropped another 40% against the German Deutschmark. Permanent instability was introduced into world monetary affairs in a way not seen since the early 1930s, but this time, strategists in New York, Washington and the City of London were preparing an unexpected surprise to regain the upper hand and recover from the devastating loss of the monetary pillar of their system.
An unusual meeting in Saltsjoebaden The design behind Nixon's August 15, 1971 dollar strategy did not emerge until October 1973, more than two years later, and even then, few persons outside a handful of insiders grasped the connection. The August 1971 demonetization of the dollar was used by the London-New York financial establishment to buy precious time, while policy insiders prepared a bold new monetarist design, a "paradigm shift", as some preferred to term it. Certain influential voices in the Anglo-American financial establishment devised a strategy to again create a strong dollar and to increase their relative political power in the world, just when it appeared they were in a decisive route. In May 1973, with the dramatic fall of the dollar still fresh, a group of 84 of the world's top financial and political insiders met at this secluded island resort of the Swedish Wallenberg banking family, at Saltsjoebaden, Sweden. This gathering of Prince Bernhard's Bilderberg Group heard Walter Levy outline a "scenario" for an imminent 400 percent increase in OPEC petroleum revenues. The purpose of the secret Saltsjoebaden meeting was not to prevent the expected oil price shock, but to plan and manage the about-to-be-created flood of oil dollars, a process US Secretary of State Kissinger later called "recycling the petro-dollar flows." Present at Saltsjoebaden were Robert O. Anderson of Atlantic Richfield Oil Co.; Lord Greenhill, chairman of British Petroleum; Sir Eric Rollof SG Warburg, creator of the Eurobonds; George Ball of Lehman Brothers investment bank the man who some 10 years earlier, as Assistant Secretary of State, told his banker friend Siegmund Warburg to develop London's Eurodollar market; David Rockefeller of Chase Manhattan Bank; Zbigniew Brezinski, the man soon to be President Carter's National Security Adviser; Italy's Gianni Agnelli, and Germany's Otto Wolff von Amerongen, among others. Henry Kissinger was a regular participant at the Bilderberg gatherings. The Bilderberg annual meetings first began, in utmost secrecy, in May, 1954, by an Anglophile group which included George Ball, David Rockefeller, Dr. Joseph Retinger, Holland's Prince Bernhard, George C. McGhee (then of the US State Department and later a senior executive of Mobil Oil). Named for the place of their first gathering, the hotel de Bilderberg near Arnheim, the annual Bilderberg meetings gathered top elites from Europe and America for secret deliberations and policy discussion. Consensus was then "shaped" in subsequent press comments and media coverage, but never with reference to the secret Bilderberg talks themselves. This Bilderberg process became one of the most effective vehicles of postwar Anglo-American policy-shaping. In 1973, the powerful men grouped around Bilderberg decided to launch a colossal assault against industrial growth in the world, in order to tilt the balance of power back to the advantage of Anglo-American financial interests. In order to do this, they determined to use their most prized weapon -- control of the world's oil flows. Bilderberg policy was to trigger a global oil embargo in order to force a dramatic increase in world oil prices. Since 1945, world oil trade had, by international custom, been priced in dollars. American oil companies dominated the postwar market. A sharp sudden increase in the world price of oil, therefore, meant an equally dramatic increase in world demand for US dollars to pay for that necessary oil. Never in history had such a small circle of interests, centered in London and New York, controlled so much of the entire world's economic destiny. The Anglo-American financial establishment resolved to use their oil power in a manner no one could imagine possible. Their scheme was utterly outrageous, and that was their chief advantage, they clearly reckoned.
Kissinger's Yom Kippur oil shock On October 6, 1973, Egypt and Syria invaded Israel, igniting what became known as the "Yom Kippur" war. Contrary to popular impression, the "Yom Kippur" war was not the result of simple miscalculation, a blunder, or an Arab decision to launch a military strike against the state of Israel. The entire constellation of events surrounding the outbreak of the October war was secretly orchestrated from Washington and London, using the powerful diplomatic secret channels developed by Nixon's White House National Security Adviser, Henry Kissinger. Kissinger effectively controlled the Israeli policy response through his intimate relation with Israel's ambassador to Washington, Simcha Dinitz. In addition, Kissinger cultivated channels to the Egyptian and Syrian sides. His method was to simply misrepresent to each party the critical elements of the other, ensuring the war and its subsequent Arab oil embargo. Kissinger, who is by then Nixon's intelligence "czar", consistently suppressed US intelligence reports, including intercepted communications from Arab officials confirming the buildup for war. Washington scripted the war and its aftermath, including Kissinger's infamous "shuttle diplomacy," along the precise lines of the Bilderberg deliberations of the previous May in Saltsjoebaden, some six months before outbreak of the war. Arab oil-producing nations were to be the scapegoat for the coming rage of the world, while the Anglo-American interests responsible stood quietly in the background. In mid-October 1973, the German Government of Chancellor Willy Brandt told the US Ambassador to Bonn that Germany was neutral in the Middle East conflict, and would not permit the US to resupply Israel from German military bases. With an ominous foreboding of similar exchanges which would occur some 17 years later, on October 30, 1973 Nixon sent Chancellor Brandt a sharply worded protest note, most probably drafted by Kissinger: "We recognize that the Europeans are more dependent upon Arab oil then we, but we disagree that your vulnerability is decreased by disassociating ourselves from us on a matter of this importance... You note that this crisis was not a case of common responsibility for the Alliance, and that military supplies for Israel were for purposes which are not part of alliance responsibility. I do not believe we can draw such a fine line..." Washington would not permit Germany to declare its neutrality in the Mideast conflict. But, significantly, Britain was allowed to clearly state its neutrality, thus avoiding the impact of the Arab oil embargo. Once again, London skillfully maneuvered itself around an international crisis which it had been instrumental in precipitating. One consequence of the ensuing 400% rise in OPEC oil prices was that investments of hundreds of millions of dollars by BP, Royal Dutch Shell, and other Anglo-American petroleum concerns in the risky North Sea could produce oil at a profit. It is a curious fact of the time, that the profitability of these new North Sea oil fields was not at all secure until after Kissinger's oil shock. By October 16, the Organization of Petroleum Exporting Countries, following a meeting on oil prices in Vienna, raised their prized by a then-staggering 70%, from $3.01/barrel to $5.11. That same day, the members of the Arab OPEC countries, citing the US support for Israel in the Mideast war, declared an embargo on all oil sales to the United States and Netherlands -- the major oil port of Western Europe. Saudi Arabia, Kuwait, Iraq, Libya, Abu Dhabi, Qatar, and Algeria announced on October 17, 1973 that they would cut their production below the September level by 5% for October and an additional 5% per month, "until Israeli withdrawal is completed from the whole Arab territories occupied in June 1967 and the legal rights of the Palestinian people are restored." The world's first "oil shock," or as the Japanese termed it, "Oil Shokku" was underway. Significantly, the oil crisis hit full force just as the President of the United States was becoming personally embroiled in what came to be called the "Watergate affair," leading Henry Kissinger as de facto President, running US policy during the crisis in late 1973. When the Nixon White House sent a senior official to the U.S. Treasury in 1974 to devise a stratagem to force OPEC into lowering the oil price, he was bluntly turned away. In a memo the official stated, "it was the banking leaders who swept aside this advice and pressed for a 'recycling' program to accommodate to higher oil prices. This was the fatal decision..." The U.S. Treasury, under Jack Bennett, the man who helped steer Nixon's fateful August 1971 dollar policy, had established a secret accord with the Saudi Arabian Monetary Agency, SAMA, finalized in a February 1975 memo from US Assistant Treasury Secretary Jack F. Bennett to Secretary of State Kissinger. Under the terms of the agreement, a sizable share of the huge new Saudi oil revenue windfall was to be invested in financing the US government deficits. A young Wall Street investment banker with the leading Eurobond firm of White Weld & Co. based in London, David Mulford, was sent to Saudi Arabia to become the principal "investment adviser" to SAMA; he was to guide the Saudi petrodollar investments to the correct banks, naturally in London and New York. The Bilderberg scheme was operating as planned. Kissinger, already firmly in control of all US intelligence estimates as Nixon's all-powerful National Security Adviser, secured control of US foreign policy as well, persuading Nixon to name him Secretary of State in the weeks just prior to outbreak of the October Yom Kippur war. Indicative of a central role in events, Kissinger retained both titles as head of the White House National Security Council and as Secretary of State, something no individual had done before or after him. During the last months of the Nixon presidency, no other single person wielded as much power as Henry Kissinger did. Adding insult to injury, Kissinger was awarded the 1973 Nobel Peace Prize. Following a meeting in Teheran on January 1, 1974, yet a second price increase of more than 100% was added, bringing OPEC benchmark oil prices to $11.65. This was done on the surprising demand by the Shah of Iran, who had been secretly told to do so by Henry Kissinger. Only months earlier, the Shah had opposed the OPEC increase to $3.01 for fear this would force Western exporters to charge more for the industrial equipment the Shah sought to import for Iran's ambitious industrialization. Washington and Western support for Israel in the October war fed OPEC's anger at the meetings. Kissinger's own State Department was not informed of Kissinger secret machinations with the Shah. From 1949 until the end of 1970, Middle East crude oil prices had averaged approximately $1.90/barrel. They rose to $3.01 in early 1973, the time of the fateful Saltsjoebaden meeting of the Bilderberg group which discussed an imminent 400% future rise in OPEC's price. By January 1974 that 400% increase was a fait accompli. The economic impact of the oil shock The social impact of the oil embargo on the United States in late 1973 could be described as panic. Throughout 1972 and early 1973, the large multinational oil companies, led by Exxon, pursued a curious policy of creating short domestic supply of crude oil. They were allowed to do so under a series of decisions made by President Nixon on advice of his aides. When the embargo hit in November 1973, therefore, the impact could not have been more dramatic. At the time, the White House was responsible for controlling US oil imports under provisions of the 1959 US Trade Agreements Act. In January 1973, Nixon appointed Treasury Secretary George Shultz to be the Assistant to the President for Economic Affairs as well. In this post, Shultz oversaw White House oil import policy. His Deputy Treasury Secretary, William E. Simon, a former Wall Street bond trader, was made chairman of the important Oil Policy Committee which determined US oil import supply in the critical months leading up to the October embargo. In February 1973, Nixon was persuaded to set up a special "energy triumvirate" which included Shultz, White House aide John Ehrlichman, and National Security Adviser Henry Kissinger, to be known as the White House Special Energy Committee. The scene was quietly being set for the Bilderberg plan, although almost no one in Washington or elsewhere realized the fact. By October 1973, domestic US stocks of crude oil were already at alarmingly low levels. The OPEC embargo triggered the public into panic purchases of gasoline, calls for rationing, endless gas lines, and a sharp economic recession. The most severe impact of the oil crisis hit the United States' largest city, New York. In December 1974, nine of the world's most powerful bankers, led by David Rockefeller's Chase Manhattan, Citibank, and the London-New York investment bank, Lazard Freres, told the Mayor of New York, Abraham Beame, an old-line machine politician, that unless he turned over control of the city's huge pension funds to a committee of the banks, the Municipal Assistance Corporation, the banks and their influential friends and the media would ensure the financial ruin of the city. Not surprisingly, the overpowered Mayor capitulated, and New York City was forced to slash spending for roadways, bridges, hospitals and schools in order to service its bank debt, and lay off tens of thousands of city workers. The nation's greatest city had begun its descent into a scrap heap. Felix Rohatyn of Lazard Freres became head of the new bankers' collection agency, dubbed "Big MAC" by the press. In Western Europe, the shock of the oil price rise and the embargo on supplies was equally dramatic. From Britain to the Continent, country after country felt the effects of the worst economic crisis since the 1930s. Bankruptcies and unemployment rose to alarming levels across Europe. Germany's government imposed an emergency ban on Sunday driving in a desperate effort to save imported oil costs. By June 1974, the effects of the oil crisis contributed to the dramatic collapse of Germany's Herstott-Bank and a crisis in the D-mark as a result. Germany's imported oil costs increased by staggering 17 billion D-marks in 1974, with a half-million people reckoned to be unemployed because of the oil shock. Inflation levels reached an alarming 8%. The shock effects of a sudden 400% increase in the price of Germany's basic energy feedstock were devastating to industry, transport, and agriculture. Keystone industries such as steel, shipbuilding, and chemicals all went into a deep crisis at this time as a result of the oil shock. Willy Brandt's government was effectively defeated by the domestic impact of the oil crisis, as much as by the Stasi-spy affair revelation's about his close adviser Gunther Guillaume. By May 1974, Brandt offered his resignation to Federal President Heinemann, who then appointed Helmut Schmidt Chancellor. Most governments across Europe fell in this period, victim to the consequences of the oil shock on their economies. But the economic impact on the developing economies of the world -- for this time they still could be rightly called developing, rather than the fatalistic term "Third World" which is so much in vote today -- the impact of an overnight price increase of 400% in their primary energy source was staggering. The vast majority of the world's less-developed economies, without significant domestic oil resources, were suddenly confronted with an unexpected and unpayable 400% increase in costs of energy imports, to say nothing of costs of chemicals and fertilizers for agriculture derived from petroleum. During this time, commentators began speaking of "triage," the wartime idea of survival of the fittest, and introduced the vocabulary of "Third World" and "Fourth World" (the non-OPEC countries). In 1973, India had a positive balance of trade, a healthy situation for a developing economy. By 1974, India had total foreign exchange reserves of $629 millions with which to pay -- in dollars -- an annual oil import bill of almost double that or $1,241 million. In 1974, Sudan, Pakistan, Philippines, Thailand, Africa and Latin America country after country was faced with gaping deficits in its balance of payments. As a whole, over 1974 developing countries incurred a total trade deficit of $35 billion according to the IMF, a colossal sum in that day, and, not surprisingly, a deficit precisely 4 times as large as in 1973, or just in proportion to the oil price increase. Following the several years of strong industrial and trade growth of the early 1970s, the severe drop in industrial activity throughout the world economy in 1974-75 was greater than any such decline since the war. But, while Kissinger's 1973-74 oil shock had a devastating impact on world industrial growth, it was an enormous benefit for certain established interests -- the major New York and London banks, and the Seven Sister oil multinationals in the US and Britain. Exxon replaced General Motors as the largest American corporation in gross revenues by 1974. Her sisters were not far behind, including Mobil, Texaco, Chevron and Gulf. The bulk of OPEC dollar revenues, Kissinger's "recycled petro-dollars," was deposited with the leading banks of London and New York, the banks which dealt in dollars as well as international oil trade. Chase Manhattan, Citibank, Manufacturers Hanover, Bank of America, Barclays, Lloyds, Midland Bank, all enjoyed the windfall profits of the oil shock. We shall later see how they recycled their "petro-dollars" during the 1970s, and how it set the stage for the great debt crisis of the 1980s.
Taking the bloom off the "nuclear rose" One principal concern of the authors of the 400% oil price increase was how to ensure that their drastic action would not drive the world to accelerate an already strong trend towards construction of a far more efficient and ultimately less expensive alternative energy source -- nuclear electricity generation. Kissinger's former dean at Harvard University, and his boss when Kissinger briefly served as a consultant to John Kennedy's National Security Council, was McGeorge Bundy. Bundy left the White House in 1966 in order to play a crucial role in shaping the domestic policy of the United States as president of the largest private foundation, the Ford Foundation. By December 1971, Bundy had established a major new project for the foundation, the Energy Policy Project under the direction of S. David Freeman, with an impressive $4 million checkbook and a three year time limit. Bundy's Ford Foundation study, titled, "A Time to Choose: America�s Energy Future," was released precisely in the midst of debate during the 1974 oil shock. It was to shape the public debate in the critical time of the oil crisis. For the first time in American establishment circles, the fraudulent thesis was proclaimed that, "Energy growth and economic growth can be uncoupled; they are not Siamese twins." Freeman's study advocated bizarre and demonstrably inefficient "alternative" energy sources such as windpower, solar reflectors and burning recycled waste. The Ford Foundation report made a scurrilous attack on nuclear energy, arguing that the technologies involved could theoretically be used to make nuclear bombs. "The fuel itself or one of the byproducts, plutonium, can be used directly or processed into the material for nuclear bombs or explosive devices," they asserted. The Ford Foundation study correctly noted that the principal competitor to the hegemony of petroleum in the future was nuclear energy, warning against the "very rapidity with which nuclear power is spreading in all parts of the world and by development of new nuclear technologies, most notably the fast breeder reactors and the centrifuge method of enriching uranium." The framework of the US financial establishment's anti-nuclear "green" assault was defined by Bundy's project. By the early 1970s, nuclear technology had clearly established itself as the preferred future choice for efficient electric generation, vastly more efficient (and environmentally friendly) than either oil or coal. At the time of the oil shock, the European Community was already well into a major nuclear development program. As of 1975, the plans of member governments called for completion of between 160 and 200 new nuclear plants across Continental Europe by 1985. The Schmidt government in Germany, reacting rationally to the implications of the 1974 oil shock, passed a program in 1975 which called for an added 42 gigawatts of German nuclear plant capacity, for a total of approximately 45% of the total German electricity requirement by 1985, a program exceeded in the EC only by France, which projected 45 gigawatts of new nuclear capacity by 1985. In the fall of 1975, Italy's Industry Minister, Carlo Donat Cattin, instructed to Italy's nuclear companies, ENEL and CNEN, to draw up plans for construction of some 20 nuclear plants for completion by the early 1980s. Even Spain, just then emerging from four decades of Franco's rule, had a program calling for construction of 20 nuclear plants by 1983. A typical 1 gigawatt nuclear facility is generally sufficient to supply all electricity requirements for a modern industrial city of one million people. For the first time, the rapidly growing nuclear industries of Europe, especially France and Germany, were beginning to emerge as competent rivals to American domination of the nuclear export market by the time of the 1974 oil shock. France has secured a Letter of Intent from the Shah of Iran, as had Germany's KWU, to build a total of four nuclear reactors in Iran, while France had signed with Pakistan's Bhutto government to create a modern nuclear infrastructure in that country. Negotiations between the German government in Brazil also reached a successful conclusion in February 1976, for cooperation in the peaceful uses of nuclear energy, which included German construction of eight nuclear reactors as well as facilities for reprocessing and enrichment of uranium reactor fuel. With full support of their governments, German and French nuclear companies entered into negotiations with select developing sector countries, very much in the spirit of Eisenhower's 1953 Atoms for Peace declaration. Clearly, the Anglo-American energy grip, based on their tight control of the world's major energy source, petroleum, was threatened if these quite feasible programs went ahead. In the postwar period, nuclear energy was the equivalent improvement of technology which oil had represented over coal when Lord Fisher and Winston Churchill argued that Britain's navy had to convert to oil from coal at the end of the last century. The major difference in the 1970s was that Britain and her cousins in the United States held the grip on world oil supplies. World's nuclear technology threatened to open relatively unlimited energy possibilities, especially if plans for commercial nuclear fast breeders were realized, as well as thermonuclear fusion. Two nuclear-industry organizations were established in the immediate aftermath of the 1974 oil shock, both based in London. In early 1975, an informal and semi-secret group was established, the Nuclear Suppliers Group, or "London Club" as it was known. This group included Britain, the US, Canada, France, Germany, Japan, and the USSR. It was an initial Anglo-American effort to impose self-restraint on nuclear export. It was complemented in May 1975 by formation of another secretive organization, which grouped the world's major suppliers of nuclear uranium fuel, the London "Uranium Institute," dominated by traditional British regions including Canada, Australia, South Africa in the UK. These "insider" organizations were necessary but by no means sufficient for the Anglo-American interests to contain the nuclear "threat" in the early 1970s. As one prominent anti-nuclear American from the Aspen Institute expressed their problem, "We must take the bloom of the 'nuclear rose.'" And they did.
Developing the Anglo-American green agenda It was no accident that a growing part of the population in Western Europe, especially in Germany, following the oil shock recession of 1974-75, began talking for the first time in the postwar period about "limits to growth," or threats to the environment, and began to question their faith in the principal of industrial growth and technological progress. Very few people realized the extent to which their new "opinions" were being carefully manipulated from the top by a network established by the same Anglo-American finance and industry circles behind the Saltsjoebaden oil shock strategy. Beginning in the 1970s, an awesome propaganda offensive was launched in select Anglo-American think-tanks and journals, intended to shape a new "limits to growth" agenda, which would ensure the "success" of the dramatic oil shock strategy. The American oilman present at the May 1973 Saltsjoebaden meeting of the Bilderberg group, Robert O. Anderson, was a central figure in the implementation of the ensuing Anglo-American ecology agenda. It was to become one of the most successful frauds in history. Anderson and his Atlantic Richfield Oil Co. funneled millions of dollars through their Atlantic Richfield Foundation into select organizations to target nuclear energy. One of the prime beneficiaries of Anderson's largesse was a group called Friends of the Earth, established in this time with a $200,000 grant from Anderson. One of the earliest actions of Anderson's Friends of the Earth was to finance an assault on the German nuclear industry through such anti-nuclear actions as the anti-Brockdorf demonstrations in 1976, which were led by Friends of the Earth leader Holger Strome. The director of Friends of the Earth in France one Brice LaLonde, was a partner of the Rockefeller family law firm in Paris, Coudert Brothers, and became Mitterrand's Environment Minister in 1989. It was Friends of the Earth which was used to block a major Japan-Australia uranium supply agreement. In November 1974 Japanese Prime Minister Tanaka came to Canberra to meet Australian Prime Minister Gough Whitlam. The two made a commitment potentially worth billions of dollars, for Australia to supply Japan's needs for future uranium ore and enter a joint project to develop uranium enrichment technology. The British uranium mining giant, Rio Tinto Zinc, secretly deployed Friends of the Earth in Australia to mobilize opposition to the pending Japanese agreement, resulting some months later in the fall of Whitlam's government. Friends of the Earth had "friends" in very high places in London and Washington. Robert O. Anderson's major vehicle to spread the new "limits to growth" ideology among American and European establishment circles, was his Aspen Institute for Humanistic Studies. With Anderson as Chairman, and Atlantic Richfield head Thornton Bradshaw as vice-chairman, the Aspen Institute was a major financial conduit for creation of the establishment's new anti-nuclear agenda in early 1970s. Among the better-known trustees of Aspen at this time with World Bank President and the man who ran the Vietnam War, Robert S. McNamara. Lord Bullock of Oxford University, Richard Gardner, an anglophile American economist who later became US Ambassador to Italy, and Wall Street banker, Russell Peterson of Lehman Brothers Kuhn Loeb Inc., were among the carefully selected trustees of Aspen at this time, as were EXXON board member Jack G. Clarke, Gulf Oil's Jerry McAfee, Mobil Oil director George C. McGhee, the former State Department official who was present in 1954 at the founding meeting of the Bilderberg group. Also involved with Anderson's Aspen in this early period was Marion Countess Donhoff, publisher of Die Zeit in Hamburg, as well as former Chase Manhattan Bank chairman and High Commissioner to Germany, John J. McCloy. Robert O. Anderson brought in Joseph Slater from McGeorge Bundy's Ford Foundation to serve as Aspen's president. It was, indeed, a close-knit family in the Anglo-American establishment of the early 1970s. The initial project Slater launched in Aspen was the preparation of an international organizational offensive against industrial growth and especially nuclear energy, using the auspices (and the money) of the United Nations. Slater secured support of Sweden's UN Ambassador Sverker Aastrom, who steered a proposal for an international conference on the environment through the UN over strenuous objections from developing countries. From the outset, the June 1972 Stockholm United Nations' Conference on the Environment was run by operatives of Anderson's Aspen Institute. Aspen board member, Maurice Strong, a Canadian oilman from Petro-Canada, chaired the Stockholm conference. Aspen also provided financing to create an international zero-growth network under UN auspices called the International Institute for Environment and Development, whose board included Robert O. Anderson, Robert McNamara, Strong, and British LabourParty's Roy Jenkins. The new organization immediately produced a book, "Only One Earth," by Rockefeller University Associate Rene Dubos and British malthusian Barbara Ward (Lady Jackson). The International Chambers of Commerce were also persuaded at this time as well to sponsor Maurice Strong and other Aspen figures in seminars targeting international businessman on the emerging new environmentalist ideology. The Stockholm 1972 conference created the necessary international organizational and publicity infrastructure, so that by the time of the Kissinger oil shock of 1973-74, a massive anti-nuclear propaganda offensive could be launched, with the added assistance of millions of dollars readily available from oil-linked channels of the Atlantic Richfield Company, the Rockefeller Brothers Fund and other such elite Anglo-American establishment circles. Among the groups which were funded by these people at this time were organizations including the ultra-elitist World Wildlife Fund, then chaired by the Bilderberg's Prince Bernard, and later by Royal Dutch Shell's John Loudon. It is indicative of this financial establishment's overwhelming influence in the American and British media that, during this period, no public outcry was launched to investigate the probable conflict of interest involved in Robert O. Anderson's well-financed anti-nuclear offensive, and the fact that his Atlantic Richfield Oil Co. was one of the major beneficiaries from the 1974 price increase for oil. Anderson's ARCO had invested tens of millions of dollars in high-risk oil infrastructure in Alaska's Prudhoe Bay and Britain's North Sea, together with Exxon, British Petroleum, Shell and the other Seven Sisters. Had the 1974 oil shock not raise the market price of oil to $11.65/barrel or thereabouts, Anderson's as well as British Petroleum's, Exxon's, and the others' investments in the North Sea and Alaska would have brought financial ruin. To ensure a friendly press in Britain, Anderson purchased ownership of the London Observer at this time. Virtually no one asked whether Anderson and his influential friends might have known in advance that Kissinger would create the conditions for a 400% oil price rise. Not to leave any zero growth stone unturned, Robert O. Anderson also contributed significant funds to a project initiated by the Rockefeller family, together with Aurelio Peccei and Alexander King, at the Rockefeller's estate at Bellagio, Italy. In 1972, this Club of Rome and the US Association of the Club of Rome gave widespread publicity to their publication of a scientifically fraudulent computer-simulation prepared by Dennis Meadows and Jay Forrester, the notorious "Limits to Growth." Meadows and Forrester embellished the discredited essay of Thomas Parson Malthus with modern computer graphics, and insisted that the world would soon perish for lack of adequate energy, food, and other resources. As Malthus did, they chose to ignore the impact of technological progress on improving human condition. Their message was one of unmitigated gloom and cultural pessimism. Germany was one of the countries most targeted for this new Anglo-American anti-nuclear offensive. While France's nuclear program was equally if not more ambitious, Germany was deemed a country where Anglo-American intelligence assets had greater likelihood of success on account of their history in the postwar occupation of the Federal Republic. Almost as soon as the ink had dried on the Schmidt government's 1975 nuclear development program, the offensive was launched. A young woman whose mother was German and stepfather American, and who had lived in the US until 1970, working for US Senator Hubert Humphrey, among other things, was a key operative in this new project. Petra K. Kelly had close ties, from her years in the US, to one of the principal new Anglo-American anti-nuclear organizations created by McGeorge Bundy's Ford Foundation, the Natural Resources Defense Council. The Natural Resources Defense Council included Barbara Ward (Lady Jackson) and Laurance Rockefeller among its board members at the time. In Germany, Kelly began organizing legal assaults against construction of the German nuclear program during the mid-1970s, resulting in costly delays and eventual large cuts in the entire German nuclear plan.
Population control becomes US "national security" In 1798, an obscure English clergyman, Thomas Parson Malthus, professor of political economy in the employ of the British East India Company's East India College at Haileybury, was promoted to instant fame by his English sponsors for his "Essay on the Principal of Population." The essay itself was a blatant scientific fraud, plagiarized largely from a Venetian attack on the positive population theory of Benjamin Franklin. The Venetian attack on Franklin's essay was authored by Gianmaria Ortes in 1774. Malthus' adaptation of Ortes' "theory" was refined with a facade of mathematical formulas, which he called the "law of geometric progression." According to this so-called "law," human populations invariably expanded geometrically, while the means of subsistence were arithmetically limited, or linear. Malthus made quite clear how his "ideal" balance between population and food resources could be achieved. "All children born beyond what would be required to keep up the population to the desired level, [would] necessarily perish unless room be made for them by the death of grown persons." Malthus, furthermore, left no doubt that this must be active policy on the part of the governments: "We should facilitate instead of foolishly and vainly attempting to impede, the operations of nature in producing this mortality. And if we dread the too frequent visitation of the horid form of famine, we should seditiously encourage other forms of destruction which we compel nature to use. Instead of recommending cleanliness to the poor, we should encourage contrary habits. In our towns, we should make the streets more narrow, crowd more people into houses and court the return of the plague. In the country we should build our villages near stagnant pools and particularly encourage settlements and all marshy and unwholesome situations. But about all, we should reprobate specific remedies for ravaging diseases and those benevolent but much mistaken men who have thought they were doing a service to mankind by projecting schemes for the total extirpation of particular disease." The flaw in Malthus' argument, as demonstrated irrefutably by the spectacular growth of civilization, technology, and agricultural productivity since 1798, was Malthus' ploy to ignore the contribution of advances in science and technology to dramatically improve such factors as crop yields, labor productivity and the like. By the mid-1970s, indicative of the effectiveness of the new propaganda onslaught from the Anglo-American establishment, American government officials were openly boasting in public press conferences that they were committed "neo-Malthusians," something for which they would have been laughed out of office a mere decade or so earlier. But nowhere did the new embrace of British malthusian economics in the United States show itself more brutally than in Kissinger's National Security Council. On April 24, 1974, in the midst of the oil crisis, White House National Security Adviser Henry Alfred Kissinger issued National Security Council Study Memorandum 200 (NSSM 200), on the subject of "Implications both Worldwide Population Growth for US Security and Overseas Interests." It was directed to all secretaries, the military Joint Chiefs of Staff, as well as the CIA and other key agencies. On October 16, 1975, at Kissinger's urging of President Gerald Ford issued a memorandum confirming the need for "US leadership in world population matters," based on the contents of the classified NSSM 200 document. For the first time in American history, the document espoused malthusianism as an explicitly desirable aim of the security policy of the government of the United States. More bitterly ironic was the fact that it was initiated by a German-born Jew. Even during the years of the Nazi regime in Germany, government officials had greater inhibitions against officially espousing such policies. NSSM 200 argued that population expansion in select developing countries which also contained key strategic resources necessary to the US economy posed potential US "national security threats." The study warned that under pressure from expanding domestic population, countries with needed raw materials will tend to demand better prices and higher terms of trade for their exports to the United States. In this context, the NSSM 200 identified a target list of 13 countries, singled out as "strategic targets" for US efforts at population control. The list was drawn up in 1974. There is no doubt that the selection of countries intended to be victims of this policy was made, as was the case in all other major decisions in which Kissinger played a role, following close consultation with the British Foreign Office. Kissinger explicitly stated in a memorandum, "how much more efficient expenditures for population control might be than [funds for] raising production through direct investments in additional irrigation and power projects and factories." British 19th Century Imperialism could have expressed it no better. With this secret policy declaration, the government of the United States had committed itself to an agenda which would contribute to its own economic demise as well as untold famine, misery, and unnecessary death throughout the developing sector. The 13 target countries named in Kissinger's study were Brazil, Pakistan, India, Bangladesh, Egypt, Nigeria, Mexico, Indonesia, Philippines, Thailand, Turkey, Ethiopia, and Colombia. The reader is invited to reflect upon the tragic history of these unfortunate 13 since Kissinger drew up the list in late 1974.
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