*Midnight Notes Collective, Midnight Oil: Work, Energy, War, 1973-1992, New York: Autonomedia, 1992, "Introduction", "1. Oil, Guns and Money", "To Saudi with Love: Working Class Composition", 3. Recolonizing the Oil Fields."
The purpose behind these 3 articles is to lay out a historical overview of class struggle in the Middle East, especially in relation to oil. The book looks at the period from 1973 to 1992 and sees the Gulf War as the attempt to terrorize and decompose the working class in the Middle East in order to hold down pressure for higher wages and standards of living. The necessity for this is the increasing rebelliousness of the population there to IMF austerity plans and the coming vast increase in capital accumulation. Basically the only way to force the working class to live amongst vast wealth with decreasing income is to increase the level of militarization and to break up the working class.
One of the results of the Gulf War was the layoff of approximately 5 million workers across the Middle East. Most of these workers are migrant labor from Asia, Africa and across the Middle East itself. After the war the oil-producing states of the region began their long planned capital investments in the oil industry. These states are relying on higher revenues generated by the steady increase in oil prices since 1988. This has taken place in context of IMF austerity programs and resistance of the working class to them. Wages and benefits are cut and privatization takes place. With the resistance to these programs there grew a threat to the regimes and monarchies of the region. Midnight Notes views the Gulf War as a process to recompose the working class to remove it as a threat to IMF austerity programs and greater expansion of investment and capital accumulation in the region. They reject other hypotheses put forward by those who opposed the war; 1) US fought Iraq for cheap oil-only 10% of US oil is from the Middle East but other interests in controlling the Mid East oil industry are US oil company profits and petrodollars, US government has intentionally sought to increase and decrease oil prices for past 40 years; 2) Inter-capitalist competition with Europe and Japan-Britain and France fought in war and Germany and Japan helped to pay for it, Europe and Japan have a stake in class relations in the Mid East and view US as necessary police force there; 3)to keep US oil companies in business and prevent alternative energy-only will happen if it is economically viable in context of prices and oil companies will profit anyways; 4)Avoidance of peace dividend- no possibility in the first place and budget was somewhat cut after the war; 5)putting down an uppity Third World state- by 1990 the Ba’th regime was dependent on US and European finance, technology, arms and trade, money from Kuwait probably would have gone to US to pay off debt, move into Kuwait was a desperate move by a regime in crisis and the history of cooperation between the US and Iraq does not seem to merit a crusade against it. Midnight Notes assumes we live in a capitalistic world, where work, price and profit are determinants of life.
Chapter 1 Oil, Guns and Money
Summary
Keynesian strategy in post WW2 period was based on increasing wages and working class consumption along with increasing productivity of factories. This required cheap oil and was the basis of the automobile economy: more gas for autos and to provide energy for factories that made autos. Most of the world’s oil was processed and sold by seven Western companies so that economic planners had no problem setting the price of oil so that it complemented the growth of the auto industry. When the governments of the states were the oil was produced demanded more tax revenue or control of the oil, they were quickly sabotaged or overthrown (e.g. Iran 1953, Iraq 1963, Indonesia 1965).
In the late 60s and early 70s the Keynesian wage/productivity deal was broken and the result of capitalist planners was in the US to impose a general austerity, shrink the working class and expand the labor market with immigration, in Europe a similar decomposition has taken place. In the oil-producing states the anti-colonial struggles and working class demands forced nationalization programs. The multinationals still retained control over refining, distribution and technical capability as well as in pricing policy. The oil states began decomposing their own working classes at this time turning to pools of multinational labor. The break of wages and work by working class struggle was achieved and threatened capital’s profits and the ability of the working class to wage these struggles was based on a relatively high level of wealth. The energy crisis was a primary component of counterattack as it led to a virtual lowering of wages and an increase of large pools of investment. Account surpluses in Western banks corresponded to austerity for all workers, waged and otherwise. The crisis is usually blamed on OPEC but OPEC producers for years wanted increases in oil prices and it wasn’t until Saudi Arabia assented that it took place. Being dependent on the US for political support has meant that Saudi Arabia has always worked in collusion with US economic plans. In fact the Saudi bank (SAMA) is managed in cooperation with the US Treasury Department. In 1971 the US gave the Saudis the go ahead, in fact the oil embargo was virtually non-existent and the supply was never really threatened. Although OPEC began the oil price increase it was the Western oil companies that immediately increased raised their own prices, indeed all energy companies increased prices (Coal, nuclear, etc). The strategy of accumulation that underlay the post-1973 oil price rise was to see how fast productivity could be increased with wages decreasing.
New problems created by high oil prices created demands by the populations of oil producing states to increase wages and social welfare. During the Iranian revolution the most substantial blow to the Shah was the oil industry strike by the Iranian proletariat that had fewer foreign workers and thus was less divided. Capital interpreted this as that without sufficient control the oil proletariat could capture a substantial portion of oil wealth and topple even brutal dictators. Up until that time Iran was the centerpiece of our Mideast military strategy and was a backup to Saudi Arabia in OPEC. The Shah was to help topple any nationalist and/or working class movement in the region. After the revolution the US has no large military force to enforce its prerogatives so a month after Iran fell the US announced a plan for a 200,00 man strong Rapid Deployment Force specifically trained for the Mideast. During the 80s the US built airfields and ports in Saudi Arabia and surrounding Arab countries for the deployment of its forces.
There was another oil price shock in 1978-79 and although a greater price rise it hardly lasted a year, leveling off in 1980 and falling in 82 and then severely dropping in 1986 when Saudi Arabia doubled its production within 9 months. This second oil shock enabled capital to assist in the worldwide reorganization of work (or perestroika). But the planned oil increases of the early 80s were abandoned and by 86 the real oil price was lower than in 74, but why? During 73-81 the mechanism by which increased oil revenue was recycled back into the international financial system was being threatened by social struggles. After the fall of many US backed regimes (Vietnam, Laos, Cambodia, Mozambique, Angola, Guinea-Bissau, Afghanistan, Nicaragua, Zimbabwe and Grenada) during the 70s based on varying degrees of mass revolutionary struggles, there was a threat of a new phase of anti neo-colonialist struggle. Also in the US and in Europe there was insurgency based on energy pricing and producing (i.e. anti-nuke movement, trucker’s strikes, and gasoline price riots).
Capital’s strategy for the 80s was using the debt of most of the world’s countries to impose IMF austerity programs. With the debt crisis and resistance to it came increasing militarization of the planet, especially with the use of the US military’s practice of low intensity warfare.
The first recourse was to a global slowdown, which was engineered by the Fed when in the fall of 79 it contracted the money supply and let interest rates reach up to 21% in 81. The contraction of markets and production furthered what the energy crisis had done, cutting wages, busting unions and increasing unemployment. For countries borrowing money from US banks the high interest rates along with loss of export markets and the decline of commodity prices increased their debts to astronomical proportions (e.g. Mexico, Argentina, Brazil). The inability of many countries to pay the debts threw them into the hands of the IMF, which provided new loans to pay back old ones. As a condition for loans they had to implement austerity programs, i.e. devaluating currency, cutbacks on government spending and public sector, promotion of exports and freer regulations for foreign capital. These measures led to further decomposition of the labor classes. If a country did not agree to an austerity program it would be blacklisted from all commercial banking, without the IMF plan no bank would deal with the country. The US and IMF could not press too hard and in 1985 the dollar was devalued by one half, this in one stroke lowered debt levels by one half around the world. In manipulation of monetary values one can see capitalist planning at the most abstract levels. One important consequence of the dollars devaluation was the simultaneous devaluation of oil in order to keep the US import bill from skyrocketing. The twin maneuvers of 85-86 with the dollar and oil devaluations exhibit how the international market is structured by capital. With the oil devaluation many oil producing states fell further in debt, and with IMF austerity measures the economy was restructured ending much state socialism.
There was a need for some form of coercion to enforce the conditions of debt and austerity measures. The states behind the IMF and World Bank had to have a way to enforce repayment of loans. Low intensity warfare was a cheap and chronic form of war and could match the timing and severity required for inducing ongoing loan payments. In the 80s military budgets soared, with the US budget increasing over a third. The soldiers were mostly Third World mercenaries (Afghan mujahedin, Nicaraguan contras, Angolan UNITA troops, Cambodian Khmer Rouge, etc). This strategy earned the tag of the “Reagan Doctrine”; this warfare was central to undermining national anti neo colonial movements, e.g., communism, and in enforcing austerity strategy internationally. If one looks at the recipients of this strategy, resulting in millions of deaths one can see the scale. In Africa- Libya, Chad, Somalia, Angola, Mozambique, and Namibia; in Asia- Afghanistan and Cambodia; in Central America- El Salvador, Guatemala, and Nicaragua. No one could escape in the 80s debt and austerity without incessant warfare. Conventional warfare also still played a role (Israel invading Lebanon, Us invasion of Panama, Grenada, etc).
The largest war of the 80s was the Iran-Iraq war. The war made working conditions brutal. The revolution in Iran was seen as a threat to the Gulf monarchies so they backed Iraq in its invasion. Also for both Khomeini and Saddam Hussein the war helped solidify their power inside their own states. For the US and the Gulf states the goal was to cancel out both powers as independent regional powers thus the reason for the billions spent by the US and Gulf states on funding Iraq, and as long as there was no threat to oil the US would not have to intervene.
During the 80s anti-austerity and anti-IMF rebellions became a part of the international class struggle. These struggles often revolved around energy pricing and production. Severe austerity riots occurred in oil producing states from 88-90, and these were popular insurrections, which had profound effects on their national governments. The ruling regime was forced to make concessions and thus did not go far enough with the austerity measures. In the Middle East the Palestinian Intifadah inspired all of the insurrections. In Algeria in 1988 riots resulted in 300 being killed and 1000 wounded and similar results occurred across the Arab world just as capital was planning increases in oil prices and in a restructuring and expansion of the oil industry.
The Gulf region the past few decades has seen mass migration to it from across Asia and Africa of people in search of jobs. About 8 million workers from outside the immediate oil producing states compromise 75% of the total labor force. For example 90% of the labor force in the U.A.E. is composed of non-nationals. These workers will not settle they have one function: to work. Often the type of work is divided by nationality in order to keep workers divided. Also there are different pay scales for different nationalities even for the same work. The conditions of workers brought in are often wretched especially for those in the low skill jobs. The decomposition of this labor force is accomplished through the increased militarization of the Middle East nations in part by the Gulf War.
The development of the Arab oil industry in the 30s brought a new era of migration in the Gulf. The immediate problem facing American and British companies was the shortage of labor. The basic question facing the companies was how to successfully mix and match an oil proletariat in order to prevent political explosions. There were dangers in having a homogenous non-indigenous labor force and limits were placed on whom, and where, people could work. Political matters included the fear of political claims if a non-indigenous group became a majority. Also workers’ struggles at the point of production also affected formation of labor policy. For example in 1943 a strike by Indian workers led Aramco to use Italian prisoners of war as slave labor. And later Saudi Arabia was prompted into banning striking altogether along with other draconian labor laws. For Arabs it was easy to find a job in the Gulf because of usage of the same language and informal networks of friends and family in neighboring states. In the 1970s the leap in oil prices led to an expansion in the industry and thus an explosion in migrant labor, doubling in the Gulf region.
The methods of recruiting the workers are both extensive and complex. Workers are usually brought in by state-owned agencies in the sending countries by private “manpower” companies. The workers may receive contracts from the Gulf state or from the business. The contractors charge exhorbant fees to prospective workers, which can take years to pay off. Often they find upon arriving that the terms of their contract have changed, known as contract substitution. There is also illegal immigration, in Saudi Arabia in 1978 when it offered amnesty 100,000 took advantage of the offer.
Workers in the Gulf are usually on short contracts and face long hours with low pay. They have few legal rights as migrants, they must be sponsored by a local employer and cannot form unions, own property, switch jobs, stay in the country without working or leave without permission of their boss. Passports are usually taken up upon employment, wages are often withheld and benefits are blocked. Before leaving their countries they must have police reports verifying their “good character”. They often end up in labor camps surrounded by barbed wire and security. Contractor camps are much worse with London based Minority Rights Group noting that the best were run by Korean companies with regulations stipulating that a bathhouse be provided for every 500 workers. Many work 7 days a week, 10-16 hours a day and have one day off a month. The wage system is three tiered with Europeans and Americans at the top, then Arabs and then finally Asians with Sri Lankans and Bangladeshis at the low end and Indians, Pakistanis, Thais, Filipinos, and Koreans at the higher end. Also different jobs for different nationalities. The level of policing is very high with 135 people needed in the security sector for every 10,000 migrants (compare the US with 22.5 police per 10,000). Often the migrant’s wives and families go through many hardships back home. In the beginning the reliance on Arab labor soon became a liability as the simple fact that a worker can read and speak the same language as the boss translates into greater awareness of (limited) legal rights or the content of the work contract. Arab workers also have been seen as prone to political ideologies of the region. Since the 70s and 80s the composition of the labor force has changed with more East and Southeast Asians.
The most exploited sector of the labor force is that of women, which is composed mostly of women from Sri Lanka, Indonesia, Thailand and the Philippines. Most are domestic servants and rape, sexual harassment and beatings are common. About 1.5% of Sri Lankans works in the Gulf and have a heavy effect on the Sri Lankan economy. The recommended minimum wage of $100 a month is often not achieved even when women work 15-16 hour days, 7 days a week. Non-payment of wages, lack of holidays, not being allowed to go out or be alone with men, no access to telephones and being locked in houses are common experiences. Within Saudi Arabia gangs of bounty hunters track down runaway workers reminiscent of slave patrols in the US. In many Gulf States domestic workers are in open rebellion, the UAE has launched a campaign criminalizing houseworkers. Following the Gulf War rapes in Kuwait skyrocketed, and Kuwait already has the highest rate of rape in the world. Many Filipino maids sought refuge at the Philippine embassy. The governments of these workers do little to help their workers since they are so dependent on remittances.
Despite restrictions, many have been able to organize and establish a foothold in the region. The more they overcame differences the more difficult it became for rulers to continue their high level of exploitation. But the decline in oil prices and the Iran-Iraq war has undermined much of the economic and political power of the oil proletariat. Lower oil prices and austerity measures have cut into their standard of living, workers in Saudi Arabia are prepared to accept wages a third lower than what their predecessors demanded 10 years earlier. Sending countries aggressively sent more workers and lowered minimum wage recommendations. In the late 80s the international intifadah threaten the regimes and hence the need for more militarization in the region.
The Gulf war emerged out of two historical forces operating at the end of the 80s: the “recolonization” of the land and natural resources and the demise of state led capitalist development (socialist and/or fascist) from the Soviet Union to South Africa. It is obvious by the Gulf War that the US has military hegemony over the world and has ushered in a New World Order. Midnight Notes sees the New World Order as a new capitalist strategy for accumulation. The recolonization was necessary to increased profits in the oil industry since they were decolonized through nationalization from the 20s to the 70s. The war created the most massive layoff in recent times, a militarization of the oil industry, a re-engineering of Mideast class relations, a jump in oil investment due to the oil price rise and a completed decimated country that will serve as a new lesson for governments incapable of fulfilling capital’s demands for austerity and recolonization.
State oil companies opened their doors to international investment in the 80s. The states that nationalized their oil fields were now forced to surrender under financial pressure to the old oil companies of the colonial era. The question was how to get capital to develop all the new oil fields since the fall of oil prices in the 80s led to a restriction of profits and investment. Oil prices had to increase in the 90s to spur investment. Before the attack on Kuwait, OPEC met and both Iraq and Saudi Arabia demanded price increases at $25 and $21 barrel respectively from $16-17 a barrel at the time. The Saudi position won out with Iraq left grumbling but unable to defy Saudi Arabia.
After the OPEC meeting Iraq began to threaten to invade Kuwait. Since the end of the Iran-Iraq war the Iraqis had been trying to negotiate with Kuwait over its debt and a shared oil field. The Iraq government had been in deep crisis since 1988. The massive need for reconstruction was met by a shortfall of state revenue since in the 80s oil prices dropped off and oil represented 95% of Iraq’s export earnings. This is why Iraq pushed for higher oil prices and concessions with its debt and an oil sharing agreement with Kuwait. There was one other problem for the Ba’th Party as well, from 87 on the Iraqi government tried to implement IMF austerity measures and privatization. But by 1990 Iraq was plunged into even greater economic crisis. The IMF plan failed in spite of the repressive nature of the Iraqi government, because given the institutional bases of support for the Iraqi regime, Iraq was unable to impose the conditions of austerity or attract private investors to take over state industries. Since the 60s the Ba’th party had instituted a police state, but the security apparatus depended on a relatively comfortable standard of living. Oil revenues allowed the state to sustain a distributive welfare state system while still investing in industrial expansion. The whole patronage system was based in the public sector industries so therefore austerity or privatization was political suicide for the Iraqi government. There were attempts at austerity but they were half hearted. They had a strategy to try to increase unemployment but keep wages high for those who still had jobs. However in the end very little unemployment was created and little private investment could be stimulated. Hussein wasn’t trying to be an anti-IMF renegade as Iraq had ambitious plans for oil sector growth that only foreign capital could provide. At the same time he wanted military increases and as an American ally he did not see his military as being antagonistic to them. Being unable to take out IMF austerity measures to get the funds to pay the IMF the Iraqi government decided to make the Kuwaiti ruling class pay.
The motive for invasion is now more or less clear. It was to save the Iraqi economy and the Ba’th party. It was to cancel Iraq’s $40 billion debt with Kuwait, loot some wealth, and stake a claim to some of Kuwait’s oil fields. Midnight Notes assumes that Iraq would view a US military response as likely, but they did not see much to lose. Both Kuwait and Iraq had internal threats that only extraordinary methods could solve. Kuwait was facing internal instability that a decisive military shock might alleviate. Hussein expected no serious counterattack or one where the US would help him consolidate power and impose IMF austerity. Neither thought the US would remove them from power since it supported both in the 80s. Hussein did think that the US would take this as an opportunity to establish military bases.
The main targets of the military campaign were Iraqi civilians and infrastructure. The only goals that can be determined from the destruction are the decimation of Iraq’s infrastructure and its civilian population through starvation and disease. After blasting Iraq, the US then slaughtered the 150,000 Iraqi troops retreating from Kuwait. Most of these troops had little training and many were poor picked off the streets or were Kurds or Shi’i that had little loyalty to Hussein’s regime. The reliable army units were kept in the rear. Thus, in Kuwait, the US massacred the working poor of Kurdistan and southern Iraq. By destroying these troops the US was destroying the men who would have the main force of revolt within Iraq. The US left the Iraqi regime intact. The US did not want to continue the war because they wanted to maintain a police state in Iraq. It was an attack on the working class of Iraq and a defense of a police state in Iraq.
The Gulf War transformed Iraq into a model for IMF-directed development. Surrounded by US troops, they are being told that they can only sell its only export commodity, oil and cannot profit from its sale. The conditions laid on Iraq will force the Iraqi government into producing oil with slaves. This is the endpoint: the approach towards infinity for capital’s austerity strategy. Of course the workers will not work unless given a subsistence wage but capital is seeing how far they can go. The Iraqi government is still continuing many welfare programs: it has a food rationing system that ensures people have a basic subsistence level of food but the continuation of sanctions will force it to renege on all its national socialist deals with workers. Sanctions are part of a strategy of transforming Iraq into a paradigm of austerity in a period of rising oil prices. The US has put Iraq back into a colonial position where the US has the power to make all the decisions regarding Iraq’s integration into the world market. Sanctions will be lifted when Iraq agrees to sell on US terms. To sell a commodity and not make a profit is a situation that many primary exporting countries can identify. The product is extracted and sold and after paying international banks the country winds up further in debt.
The war was not just to decompose Iraqi workers and install IMF austerity programs, but was to decompose the workers across the Gulf especially the migrant laborers. Kuwait expelled most Palestinians from pre-war levels of 400,000 there are now about 40,000. Saudi Arabia expelled 1 million Yemenis and over a million Egyptians workers were expelled from Iraq and Kuwait. The problem posed to capitalist planners of the oil industry was how to not waste the profits on workers. The three groups of workers explicitly targeted during the war were Iraqis, Palestinians and Yemenis the best educated and most politicized groups of workers in the region. The workers have been replaced by Asians who are even lower in the wage hierarchy or by Europeans and Americans who are paid very well.
After the war Saudi Arabia initiated the planned “modernization” of its oil industry. This is the largest expansion since the 70s. Iran has also expanded capacity partly thanks to higher oil prices from the war. The Iranian government has been developing closer ties to the IMF and has an austerity plan.
The more capital develops productivity through oil-based mechanization, the less need there is for direct human labor. Capital is nothing more than objectified human labor; it must make people work ever harder and longer inside and outside of the oil fields. Just as people realize that they need not work as much as before, they find themselves working harder or excluded from the world’s wealth. This contradiction of capitalistic development can only be regulated by capital through more policing and ever more wars. The slaughter and starvation of the Iraqi people and the uprooting of millions in the Middle East were the necessary preconditions of the most recent industrial expansion. Every round of capitalist development requires a simultaneous wave of expropriation. The Gulf War was part of capitalism’s most recent phase. The US is prepared for long-term military presence with bases in the Gulf, Turkey, Diego Garcia, and Kenya. All of the US’s best allies in the region are despised by their populations which means more reliance on the US. The profits may go up but how long can the populations allow themselves to be controlled by the US.