Despite the open and repeated calls from the Soviets and other oil producers for price stabilization, the Saudis continued their massive output, keeping the source of their motives a secret from the world. Ultimately, it was not until September 2002, when the Saudi regime desperately needed a PR boost in the wake of the September 11, 2001 attacks, that Saudi officials finally gave even minor indications of the collusion. In a carefully worded September 17, 2002 op-ed in the Washington Post, Prince Turki al-Faisal, director of the Saudi General Intelligence Department from 1977 to 2001, sought to compensate for the fact that the 9/11 attacks were carried out by fifteen Saudi nationals by saying that the increase in Saudi oil production in the mid-1980s would not “have taken place without Saudi–U.S. cooperation.” This, he said, “led to lower oil prices.”17 The prince’s piece was far from a tell-all, but it nonetheless constituted the Saudis’ biggest public admission of their role in the shock.
While this limited admission came a long time after the collusion had ended, the risks for both sides during the shock made it clear that disclosure of the truth would be far away. One of the most amazing aspects of this covert relationship was that it went forward in the face of manifold risks for both sides involved. The nervous Saudi leadership sought reassurances that the United States would provide verbal support against Soviet protests and physical support to ensure the security of Saudi oil shipped from the Persian Gulf, which was being threatened by Iran and Libya. Saudi Arabia was paying a price for assisting the U.S. economic war against the Kremlin. In Washington, Prince Bandar communicated his concerns to Weinberger and Casey, who reassured him and said that direct talks on the matter would take place during Vice President George Bush’s visit to the Arab peninsula in April 1986.18
Although these talks tried to quell Saudi Arabia’s fears, the United States also had to chance a potentially nightmarish situation in order to make the plan successful. On a domestic level, the action was harmful to the American oil industry, causing oil suppliers within the United States to lose millions of dollars in revenue. This negative was significant to Reagan, who was always a friend to big business, but, in the end, the president and his team estimated that the benefits of the situation would outweigh its costs to American industry. Also, while the domestic oil industry would be saddled, consumers would save billions of dollars in lower prices. Overall, the U.S. economy would benefit.
Internationally the United States would have to deal with the ramifications of potentially protecting Saudi ships should Iran, Libya, or the Soviets choose to take matters into their own hands. In addition, the United States bore the risk that should the world ever find out, the information could provoke a possibly violent confrontation with the Soviets.
Despite this multitude of risks on both sides, it was clear that Saudi Arabia had much more at stake in this gamble. Not only were the Saudis risking retribution from angry neighbors, but they were also risking their country’s sole commodity and source of wealth. Why, then, in the face of so many risks, did the Saudis agree to the conspiracy? On the surface it seemed like a bad economic decision, but in truth it was not. While they lost money on a per-barrel basis, the Saudis made up the difference through the overall price of oil sold.
To the Saudis, the agreement was less of an economic arrangement and more of an investment in future relations with the United States, an intangible for which there could be no real price tag. Good relations with the United States had already paid off in October 1981 in the form of the Reagan administration’s agreement to sell Airborne Warning and Control System (AWACS) aircraft and F-15 “enhancement items” to Saudi Arabia. The AWACS were capable of detecting aircraft within a perimeter of 350 miles, a wide range of space in the narrow Middle East. In the October 1, 1981 press conference explaining his decision, Reagan’s choice of words was ironic in light of the U.S.–Saudi oil collaboration four years later:
I have proposed this sale because it significantly enhances our own vital national security interests in the Middle East. By building confidence in the United States as a reliable security partner, the sale will greatly improve the chances of our working with Saudi Arabia…. As President, it’s my duty to define and defend our broad national security objectives.19
Indeed, the AWACS sale was critical to such a working partnership later when oil, not planes, drew the two sides together. The administration was in fact able to work with Saudi Arabia to enhance its national security interests—against Moscow. In essence, the Reagan administration in 1985–86 cashed in its 1981 chips. Caspar Weinberger later said explicitly: “One of the reasons we were selling the Saudis those weapons is because of the hope that lower oil prices would result.”20
On October 28, 1981, after intense lobbying from all corners, the AWACS sale was approved in the Senate by a small four-vote margin. Reagan’s dedication to this issue was vital to its passage in Congress, a fact which was not lost on the Saudi regime. Indeed not only was Saudi cooperation in the oil shock repayment for Reagan’s hard lobbying, but it also represented the potential for future military deals between the two countries. To this end, the administration did not hesitate to deliver, rewarding Saudi loyalty in May 1986 when Reagan vetoed a joint congressional resolution to prevent the sale of what Reagan dubbed “defensive missiles” to Saudi Arabia.21 To the Saudis, this was significant support at an uneasy time, reinforcing the importance of their oil conspiracy with the United States and solidifying the connection between the two nations.
In the end, it was this strong connection between the two countries that produced an agreement that was conducive to success. The excellent rapport that began with Reagan and Fahd extended to include Casey and Prince Bandar as well. Though Casey was Irish Catholic and Bandar was a devout Muslim, both detested Soviet Communism and wanted to smash it any way they could. Both knew the USSR as a godless empire that suppressed and jailed religious believers, including Catholics and Muslims. Hatred of atheistic Communism was the glue that bound the two men and their camps together, making it possible for two very different nations to find common ground.
Ultimately, this 1985–1986 covert action was pure, unadulterated economic warfare, and by all accounts the joint oil manipulation was probably the most direct, damaging assault of the White House’s economic warfare campaign. The Reagan team successfully carried out its plan without a major hitch and kept the secret through the life of the administration and beyond.22
To this day, researchers who venture through microfiche from 1985–1986 business weeklies will find no help in ascertaining the real reason for the drop in oil prices. Press accounts from the period simply profiled the merry befuddlement by the typical car owner over the cheaper prices at the tank—a pleasing polar reversal from the spikes, rationing, and gas lines of the previous decade. To understand the true reason for the 1980s price dive, researchers must look elsewhere.