THE PERSIAN GULF STRIKES IT RICH

SIX KINGDOMS OF OIL

The Persian Gulf Strikes it Rich ON a lonely stretch of sandy, salt-encrusted coastline ranging from Oman to Iran, in lands so parched that clear drinking water is a luxury, the greatest treasure hunt of modern times goes on. Bordering the Persian Gulf, sometimes thousands of feet below the surface, lies the greatest pool of oil in the world. So far, 50 billion barrels of oil reserves, worth at least $100 billion, have been found--and this is only the beginning.

This is no gold rush for amateurs. Already the West has invested $2 billion in the Persian Gulf area; it is the biggest overseas venture of U.S. big business. The leases are the subject of high-level intrigue; ordinarily friendly powers such as the U.S. and Britain compete feverishly, if covertly, for a sheik's favor: each Cadillac presented by a friendly U.S. company seems to be met by a Rolls-Royce coming from London.

The Persian Gulf's capacity to pump up oil strains belief. Within less than a year after Mossadegh's fanatics shut down the world's largest refinery at Abadan, other Middle East fields have not only made up the deficit but increased the total by more than 100,000 barrels.

The Middle East's 900 oil wells, most of them drilled in the past 10 to 15 years, have already produced as much oil as the entire output of the U.S. during its first 60 years of oil production. Since 1938, Middle East oil production has expanded 650 times. Moreover, the treasure gushes out of individual Middle East wells at a tremendously faster rate than elsewhere: the average for each well is 3,700 barrels a day, compared with 201 a day for Venezuela, eleven a day for the U.S.

Such figures mean fantastic profits to the oil companies and important strategic benefits to the West. But their impact is even greater on a land which has been slumbering since Nebuchadnezzar. Kings, sheiks and shahs have become the new tycoons--some of the world's richest men in some of the world's poorest countries. A civilization of DC-6s, Parker "513" and air-conditioned trailers has descended on proud, backward peoples.

Before the Mid-East's oil age, the tribal Arabs had a morality and political system which suited their severe lives crudely but comparatively well. The poorest Bedouin could get an audience with the great sheik and a handout from his kitchens. The mistreated slaves could flee to the local ruler, demand protection under the law of the Koran.

Then came the oil companies, bringing industrialization and cities, and breaking down feudal tribal relationships. The outpouring of Western wealth (at the rate of $200 million a year) is destroying old values before new ones can be substituted. Oil money expanded the middle classes; it educated them, and created a class hostile to economic domination by foreigners. Oil money increased the gap between rich & poor, and gave the poor something to covet.

The Middle East is no longer a place of accepted inequities.

Most Western oilmen realize this, yet reform necessarily lags behind royalties. It is easier to extract a million barrels of oil than to educate a whole people to a new, precarious, speeded-up way of life. Moreover, oil companies must beware of interfering too much: the sheik they prod may also cancel their concession. Yet (as Iran proved) if the company doesn't prod, the internal discontent can become so explosive as to endanger its position. Damned if they do, and damned if they don't, the companies move circumspectly, and in most cases with surprising skill. To bring the Persian Gulf from the era of Mohammed to the age of Stratocruisers is in many respects as difficult a task as Lenin set himself to. It must be done by precept and persuasion, with no secret police to compel obedience. As a piece of social engineering, this job, being attempted by capitalists who abhor the word revolution, bears comparison with the Russian Revolution.

TIME'S Middle East Correspondent James Bell has toured the Persian Gulf area for the past five weeks, observing the revolution. His report:

KUWAIT

The only thing small about Kuwait (rhymes with do right) is its size--6,000 square miles of overheated, waterless, treeless land at the northern end of the Persian Gulf. Everything else about it is fantastically big:

P: Kuwait is gushing oil at the fastest rising rate in the world. From nothing in 1945, production zoomed to 240,000 barrels daily in 1949 to 650,000 barrels last year--and it is still going up. A few more heaves and Kuwait will top Saudi Arabia's nearby Aramco field, now the world's No. 1 producer.

P: Kuwait's Burgan Field is the richest in the world. Its proven reserve of some 15 billion barrels equals roughly half the entire U.S. proven reserve and one-sixth of the world total. Comparison: the U.S.'s East Texas field, which intoxicated U.S. oilmen in the '30s, held only 5 billion barrels.

P: Kuwait's loading dock at Mena al Ahmadi, which thrusts nearly a mile out into the Persian Gulf, is the world's largest.

P: Kuwait's Sheik Abdullah al Salim al Sabah will get more than $200 million in oil royalties this year, the biggest oil royalty cut in the world. He probably has the biggest annual income of any man on earth. All this has come to a land no bigger than New Jersey, which was still living meanly at the close of World War II in an economy based mainly on pearling and Gulf shipping. The men responsible for this revolution--in a land where slaveholding is still legal--are a few Westerners, 45 Americans and 625 Britons, representing the Kuwait Oil Co. (a joint operation of Gulf Oil Corp. and Britain's Anglo-Iranian). Typical of the Americans are the Charles Jacksons of Cairo, Ill. Jackson, a weather-beaten well driller, runs his rig with the help of six Kuwaitis who are paid on a scale ranging from $1 to $2 a day. Jackson worries about his Kuwaitis: "They work all right if you watch them, but if you go away you come back and find them asleep."

Mrs. Jackson stays home in Ahmadi, the company's air-conditioned town that looks almost like any U.S. suburb, and raises their ten-year-old daughter in a three-bedroom aluminum prefab. Before returning to the U.S. on leave last spring after two years in Kuwait, Mrs. Jackson had been longing to enjoy 1) a reunion with her relatives, 2) a head of fresh lettuce, 3) a quart of sweet milk, in that order. After a few weeks in the U.S. she found herself longing to return to Kuwait. "We have bridge parties here and there's a woman's club that meets every other week," she says. "There's a dance every Thursday night. The first Thursday of the month it's formal, and on every British and American holiday there's a party. I think we go out a lot more than we did at home."

When summer comes, the Jacksons turn on the air conditioning and seal themselves in their house, with occasional trips to the immense swimming pool at the nearby Hubara Club. "We go to Kuwait once a week," Mrs. Jackson says. "There's a store called Jolly Brothers where we can get Campbell's soup, American coffee, peanut butter, jelly and saltine crackers."

When Kuwait Oil Co. first went into Kuwait 18 years ago, it did not worry too much about pleasing the Sheik or sharing the new-found wealth with the people. Iran changed all that. As soon as Mossadegh got into power, K.O.C. sought out the Sheik--who had been getting a measly royalty of 10^ a barrel--and offered him a 50-50 split of profits, before taxes. This year, facing the pleasant prospect of a return of more than $200 million, the Sheik also faces a problem: how to spend it on his tiny, backward kingdom without creating inflation.

Abdullah al Salim al Sabah, a tall, heavy man of about 58, has a reputation as something of a scholar. Awed subjects say he has read through the encyclopedia from A to Z; currently he is writing a history of Kuwait. He is a kindly, gentle man, with a low, musical voice which he seldom raises. Every Friday he takes off on a cruise in his well-fitted dhow, accompanied by officials from K.O.C. and local American and British diplomats. He relaxes and invites his foreign friends to air their problems. There is nothing about him of the autocratic air of his neighbor, Ibn Saud. He revived the Majlis (an informal council of sheiks and leading businessmen) which predecessors suppressed. He has plans for setting up some kind of constitutional government in Kuwait "when the people are ready." In the meantime, the door of his small, unpretentious palace is open to anyone who has anything to say to him.

Abdullah shies away from travel: "If I go to America they will put me in an elevator and take me whishing up to the 750th floor and I'll be terrified. If I go to England they will put me in a feather bed and I will be asphyxiated. No."

His sheikdom is changing fast. Today, Kuwait merchants can supply anything from diesel generators to bobby pins. The streets crawl with four-hole Buicks churning up the fine dust (Abdullah plans to pave the streets). When K.O.C. came, there were four elementary schools, 600 boy pupils; now there are 31 schools and 7,500 pupils, including girls. The Sheik has built a 400-bed hospital, a women's hospital, dental clinics.

Anxious to spend his money, he has asked the British to send him another 100 experts to plan other improvements. Says he: "Do not judge our people harshly. We are just starting towards progress. Any place you go, you will find things you can praise and things you can blame--even in President Truman and among the greatest people. Perfection is only with the Almighty."

TRUCIAL SHEIKS

Four hundred miles down the coast live the seven Trucial Sheiks. There are fishtail Cadillacs for them, but no free schools for their 80,000 people. The sheikdoms--6,000 square miles of low, arid barrens fringing the southern approach to the Persian Gulf--look as though God here carried out a great scorched-earth policy. They typify the Persian Gulf without oil --nothing but sand, rock-bottom Arabs and hard-living sheiks.

But the Trucial Sheiks (socalled because they signed truces with the British to stop piracy) are hopeful. A subsidiary of Iraq Petroleum (which is American, British, French and Dutch owned) is prospecting the area for oil, meanwhile paying the Sheiks a small subsidy. So far the wells have been dry, but the drillers--a hardbitten, windburned American crew who live in primitive tent camps, drinking distilled water, eating out of cans--are convinced that next year fortune will strike the sheikdoms.

Evidently the British think so too. They recently sent an emissary to 70-year-old Sheik Shakabut at his cement fort, decorated him as Commander of the Order of the British Empire.

QATAR

Qatar (pop. 25,000), to the south of Kuwait, marks the next stage of the evolution of a sand-blown sheik into a millionaire. Seventeen years ago, Qatar (rhymes with butter) was no more than a sunburned thumb--120 miles long and 50 wide--sticking out into the Persian Gulf. Periodically, howling shamal winds blistered the low, monotonous plateau. Doha, seat of government, was a mud village, and the only sign of industry was a few palm groves by the sea and a few fishing boats. The only foreigners were American missionaries.

Enter the ubiquitous Iraq Petroleum Co., through a subsidiary, called Petroleum Development (Qatar) Ltd. It dragged in equipment, pitched tents, and started exploring for oil. By the time war broke out in 1939, Qatar was ready to begin production. The British ordered the wells jammed, to prevent their capture and use by the enemy; Qatar went back to sleep.

At war's end P.D.Q. came back, and two years ago it shipped its first crude. Last year total production reached 18.5 million barrels. Last week 57-year-old Sheik Ali, a dull but honest fellow, was getting an average $1,360 a day in royalties. As soon as the British can find a suitable teacher, they promise to open the first school in Qatar's history. P.D.Q. has built a network of roads, and now the big new Cadillacs and Buicks in Doha have some place to go. The Eastern Bank has opened a branch. The Sheik's royalty will shortly be increased when he finishes negotiating a new 50-50 deal.

BAHREIN

Bahrein, just 100 minutes by plane across the Persian Gulf from Kuwait, epitomizes the progress that can be made when a sheikdom has a good ruler, a devoted foreign adviser, and enough oil royalties to work with. The five-island archipelago produces only one-thirtieth of Saudi Arabia's crude, has one-fortieth of Iraq's proven reserves, earns but a fiftieth of Kuwait's royalties. Yet Bahrein (rhyme with ah, rain) is the showplace of the oil kingdoms. Manama, the capital, looks more like a clean town in the West Indies or Bermuda than an Arab town. It has dial phones, running water, sewers, electricity. Mobile DDT sprayers roam over the islands. Malaria has been wiped out, trachoma is disappearing. There are schools and hospitals, and one of the few insane asylums in the whole Arab world.

U.S. Oilman Max Thornburg, onetime administrator of Iran's defunct Seven-Year Plan, who lives part of each year like an air-conditioned Robinson Crusoe on one of the Bahrein Islands, says: "If the Point Four people really want to know how to handle this sort of thing, they should come out here and study Bahrein."

The first thing they should look for is a 6 ft. 4 in. skyscraper of a man who wears loud clothes and has a surprisingly unlined face for his 57 years. If all Britons in the Middle East were as able, deft and unruffled as Bahrein's Financial Consultant Charles Dalrymple Belgrave, Britain would be winning, not losing, popularity contests in the Arab world. Belgrave, an officer in the British Camel Corps in the Sudan in World War I, answered a blind personal ad in the London Times in 1925. The job was to advise a sheik in Bahrein. Belgrave took it, married a childhood friend, and set out with her for the Persian Gulf. He found Bahrein living on an income of something less than $500,000 a year. Sheiks at that time were not in the habit of sharing the wealth. But Belgrave talked the Sheik into electricity for the capital, public health measures, and an inter-island causeway.

In 1932 the Bahrein Petroleum Co., jointly owned by two American companies, the Texas Co. and Standard of California (but registered as a Canadian corporation), discovered oil. Production has risen slowly to 30,000 barrels daily, which is about the best Bahrein can do. Some day, perhaps in 20 years, all of Bahrein's oil will be gone.

But when it is, Bahrein will be prepared. Again persuaded by Belgrave, the Sheik has been saving a husky part of his $4,000,000-a-year oil royalties (which are due to be raised). The Sheik keeps one-third for himself, salting away a good chunk in British securities; spends another third on public improvements; deposits the remaining third in the bank, where it buys British government debentures. Today Bahrein has a growing cash reserve of more than $6.500,000 against the inevitable day when the last of the oil is drained away.

Belgrave did not do this alone. Bahrein's little Sheik, Sir Sulman bin Hamad al Khalifah, who came to the throne in 1942, is a good ruler. He looks like Jordan's late King Abdullah, has the same dignified mien and dancing eyes. Sulman's memory is phenomenal: he remembers which oil driller's wife is having a baby. He takes all the newspapers, listens regularly to the Arabic radio broadcasts. When the Moscow radio calls Belgrave a "dictator" Sulman chuckles, twits his $9, 600-a-year adviser. From time to time, in his Rolls-Royce with a coat of arms designed by Belgrave, he drops by Belgrave's office, wants to know all that's going on.

Sheik Sulman has a palace, neat but not gaudy, overlooking the oilfields. He collects falcons, saluki dogs and fast Arabian race horses. He has a private preserve of black buck gazelles imported from India, and is the only one allowed to shoot them. Like Kuwait's Abdullah and most of the sand-dune sheiks, he has never traveled beyond the Middle East and doesn't intend to.

IRAQ

Iraq's oil is a big IF. The oil is there, all right, and has been since recorded history. Noah caulked his Ark "within and without with pitch" taken from bitumen springs in the Tigris and Euphrates Valley. Just a few hundred yards from where Nebuchadnezzar, "full of fury," cast Shadrach, Meshach and Abednego into the fiery, oil-fed furnace, Iraq Petroleum (then called Turkish Petroleum) in 1927 blew in its first well with a gush that could not be controlled for three days. Iraq's proven reserve (7.5 billion barrels in the Kirkuk field alone) is within respectable distance of the great Kuwait and Saudi Arabian holdings.

Yet Iraq's past output has been paltry compared to its potential. And its future is hazy and filled with portents.

The jinx of Iraqi oil is an incredible series of political double-dealings. The British first tried to develop Iraqi oil before World War I, but the Germans cut in and both were stymied. They made a deal and were about to start work when the war interfered. In 1920, with the Germans ousted, the French insisted on getting into the act; then the Americans set up a clamor. Turkish Petroleum was renamed Iraq Petroleum and was divided between Britain, France, the U.S. and The Netherlands, with each holding 23.75%. The remaining 5% went appropriately to the wily old Armenian influence-peddler who got them together: Calouste S. Gulbenkian, another candidate for richest man in the world.

Now I.P.C. had plenty of oil, capital and cooks (too many). But its trouble was not over. Its fields are smack in the middle of nowhere, and the two pipelines to the Mediterranean were greatly inadequate. I.P.C. began building new lines. One, through Palestine, was stopped by the Arab-Israeli war, and has never been completed. Another, through Lebanon, was finished but quickly proved too small. A third, through Syria, ran afoul of Syrian government scheming.

The Lebanese have subsided the Syrians are more cooperative. Now the difficulty is the Iraqi themselves. Watching the rise of Mossadegh next door in Iran, I.P.C.'s alarmed management sped representatives to Baghdad last spring to negotiate a 50-50 split. Angry opposition rose from Iraq's right-wing Istiqlal (Independence) Party, led by Sediq Shenshal, an eloquently demagogic Anglophobe and the man most likely to become an Iraqi Mossadegh. For months the pro-ratification forces, led by perennial Premier Nuri es-Said Pasha, old and faithful henchman of the British, hesitated to force the issue in Parliament. The last time that Iraqi moderates brought back a treaty from Britain --the generous Portsmouth (England) Treaty of 1948 granting Iraq many benefits--they got not thanks but a series of anti-British riots that raged for two weeks, killing 34 and wounding hundreds. The government was forced to flee and the Regent had to repudiate the treaty before the rioters would subside.

Two weeks ago, canny old Nuri es-Said managed to push the new proposal through Parliament, by a vote of 89 to 7. Now oil should flow. Iraq badly needs the revenue. Nowhere in the Middle East, except in Iran's incredibly wretched Azerbaijan province, is there such misery--people dressed in patched-up patches, shoeless in freezing cold; fighting with the dogs for swill; violent, grasping beggars. By law, most of Iraq's oil revenues now go to the country's new Development Board, whose principal task is the Wadi Tharthar project to divert floodwaters into irrigation and make ancient deserts bloom.

SAUDI ARABIA

The British Empire moved in and made itself at home along the Persian Gulf coast before most Americans heard of the place. At a time when the Continental Congress in Philadelphia was fretting about King George III, the British were already sending desert mail through Kuwait. Their troops marched into Bahrein while Dan'l Boone was potting Indians. The British never gave up their hold. Today, they "protect" the whole west side of the Gulf--the oil-bearing region. The sheiks are treaty-bound to give concessions only to the British, and political advisers sent from London see that this is done.

Every oil company from the Trucial Sheiks north to Iraq speaks with a British accent. Though Kuwait Oil is half U.S.-owned, it is incorporated as a British company, and at the Ahmadi clubhouse, Punch lies on the tables, not The New Yorker. The Bahrein Petroleum Co. is 100% U.S.-owned, but is registered as a Canadian corporation, and employs more Britons than Americans. Iraq Petroleum belongs to four countries, but save for the indispensable drillers whose Texas-Oklahoma skill cannot be duplicated, there is not an American voice to be heard at the Kirkuk, Basra or Mosul fields.

In the whole Middle East there is only one truly U.S. company--the Arabian American Oil Co. of Saudi Arabia. Aramco is American-owned, American-operated, and entirely geared to the American way of doing business. Its bosses have deliberately tried to avoid the mistakes the British committed. The sahib manner is taboo; respect for Arab customs is required, and Americans who don't conform get a swift trip home. The first Aramco geologists in Saudi Arabia wore beards and Arab garb, to be as inconspicuous and inoffensive as possible.

Today Aramco employees wear no beards, but the company forbids their keeping dogs as pets, forbids their getting married in Saudi Arabia, and makes them get out of sight to hold Christian church services, which are officially outlawed.

Aramco has never forgotten that when Ibn Saud granted his concession to an American rather than a British company, he emphasized: "Americans get oil out of the ground and they stay out of politics." The company has gone to extremes to observe that precept. It never asks how the King spends his royalties, why he wants another advance; it doesn't argue against his expensive whims. It keeps out of the snarl of Arabian politics.

So far, its policy has paid off. Aramco's 440,000 square miles, the world's largest concession--an area greater than Texas and California combined--sits on a pool of oil already estimated at 15 billion barrels, or half the entire U.S. reserve. In 13 years since beginning production, Aramco has quietly moved to the top, is today the largest- sing'e oil-producing company in the world. It has marked up a fortyfold increase in output since 1944. Today more than 850,000 barrels gush daily from Aramco wells, an amount equal to one-eighth the oil used by the U.S., thirstiest of all oil consumers. And Aramco has only scratched the crust. Three Aramco fields are not even being exploited, because

Aramco already produces more than it can ship or pipe.

Before Aramco came, Ibn Saud's annual revenues averaged around $16 million (from pilgrims to Mecca and customs). In the past four years alone, Aramco has placed $300 million in royalties in his hands. The new 50-50 profit split (after taxes) negotiated late in 1950 has swollen his take; in 1951 it amounted to $125 million.

No Mid-East oil concessionaires have done more. From dousing Riyadh with DDT to building schools, to enticing Arab workers into saving (a revolution in a land where tomorrow was always Allah's concern), Aramco has been a model outfit.

No one pretends that the royalties it pays have been spent as wisely and as well as, say, Charles Belgrave and Sheik Sulman spent Bahrein's. Too many fancy new palaces, swimming pools and Cadillacs have appeared in Riyadh. But except by giving an example of how money wisely spent can improve Saudi Arabia, Aramco refuses to interfere.

"Why should we?" asked an Aramco executive. "We're a commercial company, operating in their country as guests and partners. Saudi Arabia is a sovereign country. It would be impertinence to tell them what to do."

Today, in spite of treading the straightest path possible, Aramco has still not won immunity from the fear of the future that since Iran nags every Mid-East oil company. Autocratic, 76-year-old Ibn Saud, its best friend, is declining fast. "What happens in Saudi Arabia," ask British critics, "when Ibn Saud dies and all these emirs start fighting over the spoils? You are going to have anarchy and you'll wish you had exercised control."

The disintegration of this granite-faced man, whose steely strength and craftiness unified a sprawled sand ocean of 900,000 square miles and its 6,000,000 warriorlike people, has brought uncertainty to the country. The old man now seldom rises from the wheelchair which Franklin D. Roosevelt gave him after Ibn Saud admired Roosevelt's. He sometimes embarrasses visitors by falling asleep in mid-conversation.

Ibn Saud's heir apparent, 50-year-old Saud, has little of his father's old forcefulness and guile. He needs both badly, for he has enemies as far as one can see across the Arabian sand and jebel. Finance Minister Abdullah Al-Soliman, trusted confidant of the King and the most powerful man in the country outside the royal family, would rather see 46-year-old Foreign Minister Feisal, Ibn Saud's second son, succeed to the throne. So would the British.

Despite the alarms, Aramco keeps hands off. Iran, it feels, demonstrated conclusively the futility and danger in the old British policy of meddling, bribing and threatening. Aramco continues to pledge its entire fortune to the theory that if the West comes to the Middle East as a friend, it will be welcome and both will profit.

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