Social Text 73, Vol. 20, No. 4, Winter 2002. Copyright © 2002 by Duke 
University Press.

continued

at the relatively high price at which oil was produced and sold in Texas.
Prices in Texas, in turn, following the passage of the Texas Market Demand
Act of 1932, were protected by production quotas set by a state body, the
Texas Railroad Commission, and later by federal import quotas.
The 1929 agreement, combined with the government regulation of U.S 
pro-duction,
prevented the emergence of a competitive market and thus assured
extraordinary profits to those who controlled the cheaply produced oil of
the Middle East. After World War II the oil companies were producing oil
at less than 30¢ a barrel, including the cost of exploration, pumping, 
stor-age,
and depreciation, and later as low as 10¢ a barrel, and were selling it
to refineries at $2 a barrel.6 In the 1960s the producer countries of the
south began to play a more independent role, and in the following decade
the organization they created, the Organization of Petroleum Exporting
Countries (OPEC), took over the role of maintaining the scarcity of sup-ply,
generally in collaboration with the oil corporations and major non-OPEC
producer countries.
The third feature of global oil is that in these arrangements one coun-try,
Saudi Arabia, came to play a special (but misunderstood) role. The
country developed in the course of the twentieth century into one of three
very large producers of oil, alongside the United States and Russia. In the
1990s these three countries each produced approximately twice as much
oil as any of the other large producers (Canada, Norway, the United King-dom,
China, Venezuela, Mexico, and Iran). Saudi Arabia’s importance
lay not simply in its abundance of supply, however, but in its pivotal role
in the system of scarcity. The argument, made with increasing frequency
following the September 11 attacks, that Saudi Arabia was now of reduced
importance to the United States because there were many alternative
sources of oil, overlooks this point. It assumes that the United States was
concerned to maintain supplies, when in fact it was more concerned to
maintain scarcity. Unlike Russia and the United States, Saudi Arabia has
a low domestic demand for oil and can afford to keep much of its pro-duction
capacity switched off. This unused capacity (more than 3 million
barrels per day in the 1990s) was close to or exceeded the total production
of any other country except Russia and the United States. The excess
gave Saudi Arabia the unique ability to operate as a “swing” producer,
switching its surplus on and off to discipline other producers who tried to
exceed their production quotas, thus maintaining the system of scarcity. It
did so in collaboration with the United States, on whom it depended for 
mil-itary
protection. As a result of these three factors —inelastic demand, 
over-abundance,
and the Saudi surplus—ever since the establishing of a global
oil economy in the 1930s, the possibility of large oil rents anywhere in the
world depended on the political control of Arabia.

The fourth characteristic of the global economy of oil is the method
of creating this political control. In 1930 there was no state of “Saudi
Arabia,” and no colonial power was strong enough, alone, to create one.
This reflects the historical moment at which the global oil economy
emerged—something the literature on the political economy of oil does
not explore. It was not unusual for large corporations to avoid the risks of
markets by establishing oligopolies or exclusive territories of operation. In
fact, the modern, large-scale commercial corporation was invented pre-cisely
for that purpose. Its origins lie in the colonizing corporations of the
seventeenth to nineteenth centuries —the East India Company, the Hud-son
Bay Company, the British South Africa Company, and many others —
that were given exclusive rights and sovereign power to monopolize the
trade in particular goods for specific territories. However, the major oil
companies, which were the first and the largest of the new transnational
corporations of the twentieth century, established their global presence at
the historical moment when the old system of empire, built up originally
through colonizing corporations, was finally disintegrating.

The period from 1930 to 1945, when the oil corporations became
global, coincided with the defeat and collapse of the form of empire that
had shaped world trade for more than three centuries. There were four
features of this power I want to mention in order to explain the 
signifi-cance
of Islamic movements after its collapse. First, sovereign power
belonged not only to a handful of European states but also to the coloniz-ing
corporations. The collapse of this form of power began much earlier
in some places (in America in the colonial revolt of 1776, for example,
and in India in the uprising of 1857) than in others, such as in Africa,
where European corporate power and the monopolies it created continued
well into the twentieth century. Second, earlier imperial power enjoyed a
great advantage in military violence (always available to, and often 
estab-lished
by, the colonizing corporations), which could be used to defeat, and
in many cases annihilate, local opposition to the colonial authority. Third,
imperialism made use of the dispossessed agrarian populations of Europe
to produce white settler communities around the globe, which were rarely,
if ever, subject to local forms of law or political authority. Fourth, 
imperi-alism
employed a widely accepted principle of political, moral, and intel-lectual
organization to create its social order —racism.
By 1945 all four of these elements of imperial power had come to an
end. First, the new transnational oil companies had to establish their 
oli-gopolies
and exclusive territories by secret collusion, rather than imperial
edict; and they had to acquire the rights to particular territories by 
nego-tiation
with local powers rather than by force. Military support was now
available only in exceptional circumstances. Second, although by 1945 the 
United States enjoyed preponderant global military power, its use was
quite restricted. In the Arab world, the Palestinian rebellion of 1936 –39
had shown the British the difficulties of maintaining military occupation
by force, and the Americans were to learn the same lesson a little later in
Southeast Asia. Part of the difficulty was that countries of the global south
would no longer accept foreign military bases. In 1945 the United States
had military bases in occupied Germany and Japan—but almost nowhere
else in between. That year, it negotiated and began construction of a 
mil-itary
base at Dhahran, the center of Aramco’s oil operations in Saudi Ara-bia.
In the 1950s Dhahran became the largest U.S. military base any-where
between Germany and Japan. Washington managed to retain the base
only until 1962, when popular anti-imperialism forced the Saudi govern-ment
to ask the Americans to leave. Not until three decades later, follow-ing
Iraq’s invasion of Kuwait in August 1990, were the Americans pro-vided
with an opportunity to reoccupy the base. Third, by the 1930s
population growth in most northern European countries had slowed 
con-siderably,
and there was no longer a large white settler population available
to accompany the establishing of overseas corporate operations. The
smaller groups of white settlers that accompanied corporate expansion
abroad, such as the American colony in Dhahran, moreover, no longer
enjoyed complete immunity from local law. Finally, the rise of fascism and
the Nazi holocaust in Germany had suddenly made European racism an
embarrassing system of political and social organization. As Robert Vitalis
shows, corporations like Aramco brought all the methods of American
racial segregation of labor to Arabia, with entirely separate residential
compounds and standards of living for four separate racial groups (whites,
nonwhite foreigners, Arabs, and riffraff ). However, corporate racism led
to frequent labor protests, and made the position of Aramco in Saudi
Arabia increasingly fragile.
This historical context, then, represents the fourth feature of the
political economy of oil: the major oil companies required a system based
on the exclusive control of oil production and limits to the quantity of oil
produced—only an antimarket arrangement of this sort could guarantee
their profits. But they sought to establish such an arrangement, beginning
in the 1930s, at precisely the moment when the old methods for produc-ing
global antimarkets —colonialism—were in the process of collapse. It is
these factors that would give political Islam its special role in the 
political
economy of oil.
Ibn Saud, the future king of the future Saudi Arabia, grew up in exile
in the British protectorate of Kuwait. In 1902 he captured his family’s 
for-mer
base, the town of Riyadh in central Arabia, and for the following
quarter of a century was one of several local warlords competing to con-trol 
the Arabian Peninsula. He depended initially on funds from the British
and subsequently on an alliance with the muwahhidun. Although not him-self
especially devout, he drew his strongest military force from the
Ikhwan, or Brotherhood, an egalitarian movement attempting to replace
the increasingly threatened life of Arabian tribal nomadism with settle-ment
and agriculture and the degenerate practices of saint worship and
excessive veneration of the Prophet with the strict monotheism of tawhid.
The Ikhwan revived the classical doctrine of jihad (the duty to struggle
against unbelievers) and expanded it to justify war even against fellow
Muslims whom they considered to have abandoned the true form of
Islam. In place of tribal raiding and the extraction of income from the
declining trans-Arabian caravan trade, the Ikhwan joined Ibn Saud in a
war against what they saw as the polytheism of the wider Muslim com-munity.
In 1913–14 Ibn Saud took control of eastern Arabia (whose mainly
Shia population the muwahhidun considered heretics). After World War I,
he captured northwestern Arabia, and in 1925 he seized the kingdom of
Hejaz in the west, which contained the holy cities of Mecca and Medina
with their powerful merchant families, and offered its ruler the large annual
income from pilgrimage to Mecca. The Ikhwan began to impose their
form of purified Islam on the Hejazis, destroying a memorial at the
prophet Muhammad’s birthplace and other places of worship they con-sidered
improper, and banning the consumption of alcohol and tobacco.
To control the Ikhwan’s zeal, Ibn Saud set up his own committees on
public morality, charged with the suppression of vice and, increasingly,
policing the spread of “harmful ideas” and participation in antigovern-ment
meetings.
The autocratic rule that Ibn Saud was building relied on British fund-ing
and weapons to defeat rival powers in Arabia; the Ikhwan were dedi-cated
to ridding Arabia of personal corruption and immorality, which
they associated with the presence and power of colonialism. Inevitably, a
tension arose between the ruler’s need for foreign support and the puritan
force that helped him conquer and rule Arabia. Following the conquest of
Hejaz, the Ikhwan began pushing to expand their jihad northward into
Jordan, Kuwait, and Iraq, British protectorates that Ibn Saud could not
afford to challenge. In 1927 the Ikhwan rebelled against Ibn Saud’s restraint
on their expansion. With British help, he crushed the revolt and by 1930
neutralized the Ikhwan movement.
The muwahhidun remained a powerful force in Arabian politics but
were unable to prevent Ibn Saud’s accommodation with the imperial pow-ers
that financed him. In the same year that he defeated the Ikhwan, he
began negotiations with the Standard Oil Company of California 

TO BE CONTINUED