EGEE 120
Oil: International Evolution

The Prize Chapter 24: The Suez Crisis

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Consider the following questions:

Consider the following questions: Do you see any historical parallels of the Suez Crisis? How was Suez a warning to the oil consuming west? What were some consequences of the Suez Crisis? How did the Suez schism end? Who were the winners and losers? What were the effects of the illnesses of the key players (Eden (1953-1957), Eisenhower (1955-1956), and Dulles (1956)) What was Anthony Eden’s special prayer for the British people in 1970 and how things might have been? Do you believe it came true some years later? Explain.

The Suez Canal

The Suez Canal is a 100 miles narrow waterway from the Egyptian desert to the Red Sea in the Mediterranean which was the handiwork of Ferdinand de Lesseps, a Frenchman. It was begun in 1859 and completed in 1869 by the Suez Canal Company, which won the concession from Egypt (they owned 44%). The Prince of Wales called it our “highway to India,” as it substantially reduced the distance and travel time by about half to India via the canal, compared to a journey around the Cape of Good Hope. The British PM, Benjamin Disraeli, acquired the 44% Egyptian stake in 1875 for Queen Victoria when it came on the market and sent the following note to Queen Victoria: “You have it, Madam.” The canal’s significance was strategic, as it served as a lifeline of the British Empire. When, in 1948, India became independent, the canal lost its traditional rationale of being critical for the defense of India or the empire. It subsequently became a highway of oil and not of empire, as it cut the 11,000 mile journey of Persian Gulf Oil to Europe around the Cape of Good Hope to 6,500 miles through the canal. In fact, by 1955, two thirds of all of Europe’s oil passed through it. Because of its strategic value, it was always closely guarded by the British. The British stand in WWII against Rommel was precisely in defense of the canal.

Colonialism, Nationalism, and Nasser

Britain ruled Egypt and had control of the canal for more than 75 years. Then, a military coup led by General Mohammed Naguib sent the sybaritic King Farouk of Egypt to Riviera in 1952, and, in 1954, another coup led by Gamal Abdel Nasser overthrew General Naguib. Nasser was a gifted speaker and a fiery nationalist with a vision who was dedicated to Egypt’s restoration and independence. He promoted Pan-Arabism (similar to the great Islamic empire of the 8th and 9th centuries) and the elimination of Israel using the powerful radio station and propaganda tool, “The voice of the Arabs.” To Nasser, the “Greatest international crime” in history was the creation of Israel.

Among the most visible of the relics of colonialism which were handicaps for the West’s struggles with communism and the Soviets were the Suez Canal Company and the attires of the British & French captains. Also, the canal tolls were seen as going to the European owners not the impoverished Egyptians. The US saw these very visible colonial relics as a severe handicap in thwarting communism, as Nasser turned to the Soviets and socialism in 1955 to help his economy.

Gamal Nasser
Gamal Nasser

The British were set by treaty to leave the Canal Zone in 1968. Nasser wanted a 50-50 sharing of the canal profits similar to the oil 50-50 agreements, but the British refused. To appease Nasser and strengthen the Egyptian economy, the US and Britain lobbied for a loan from the World Bank for the Aswan dam on the Nile, and the British also pulled out of the canal zone in June 1956. But American politics (fear of competition from Egyptian cotton to US cotton from the southern senators, opposition of congressmen friendly to Israel, and Nasser’s recognition of Red China) resulted in denial of the loan. The US actually had the choice of providing the foreign aid to either Tito (Yugoslavia) or Nasser (Egypt) but not both, and the US chose Tito.

Nationalization of the Suez Canal and the After Effects

Nasser was furious, and on July 26th the Egyptian military took control and nationalized the canal. A three month diplomatic circus ensued. London and Paris assumed Egyptians without the proper training would not be able to run the canal by themselves, but a cadre of Egyptians assisted by Soviet ship pilots managed to keep the canal running normally. The British and French wanted military action, but President Ike Eisenhower was up for re-election in Nov 1956 and didn’t want war. He had just ended the Korean War and was running as a man of peace. He felt force was neither warranted nor justified and thought the British & French were incapable of establishing a viable government that would be able to survive. He also didn’t want to inflame Arabs & encourage communist revolutionaries.

The British and French saw fascist parallels as they likened Nasser to a resurrected Mussolini and even a nascent Hitler. The French saw Nasser as a threat to their position in North Africa, and both London and Paris were strongly inclined to military intervention. The loss of Britain’s oil in the Middle East through the Canal would be devastating economically. In fact, at one point, the British only had enough gold reserves to last three months without oil. Also, with Britain losing ground in most places, prestige became important, and they felt that if force had to be used, it was better now than later. Washington, however, did not agree, and Eisenhower & the American position favored diplomacy. Thus, the British and French were truly caught in a terrible dilemma. If they took strong action against Egypt and it resulted in interruption in the production and transport of oil, they would have “had it.” On the other hand, if they did not respond and Nasser got away with it and other Middle East countries followed suit with oil nationalization, they would have equally “had it.” Eisenhower formed the Middle East Emergency Committee to figure out how to supply Western Europe with the substantial surplus capacity in US & Venezuela should the Canal be blocked. He also sent Robert Anderson mission to Saudi to get them to apply pressure on Nasser to compromise. He even presented the development of nuclear energy technology that could threaten oil as an energy source if the situation got out of control.

The Surprise Military Attack and How the Attackers Were Left to “Boil in their Own Oil”

The British, French, and Israelis drew up a plan on October 24, 1956 to regain the canal and strike at Egypt. The objective for the British and French was to bring about a canal settlement and possibly overthrow Nasser in the process. Around that same time, a joint military control was established between Egypt, Syria, and Jordan. Other events created fear and uncertainty. The same day as the British, French, and Israeli diplomats met, the Soviet Red Army entered Budapest (Hungary) to suppress a revolt against Soviet control. Also, in early October, the British PM, Anthony Eden, had collapsed and was rushed to hospital with a 106 degree fever. It should also be noted that Eden was not the only sick key player, as Eisenhower, who suffered a heart attack in 1955, had had another one in June 1956.

It should be noted that a third key player, US Secretary of State, John Dulles, suffered from sickness and was rushed to the hospital on November 3,1956 with acute stomach cancer, resulting in the removal of part of his stomach. Also, the war was initiated while Americans were preoccupied with elections one week away.

On October 29, 1956, Israel initiated the attack from the Sinai Desert. The next day, the British and French announced their intention to occupy the Canal Zone & bombed Egyptian air fields on October 31. The British and French forces were slow, and that gave Nasser time to scuttle (or sink) ships full of cement and old beer bottles in the canal, blocking it off from enemy advances. The Syrians also sabotaged the pumping station along the Iraqi oil pipeline.

The October attacks were a complete surprise to Eisenhower, who was furious. The British mistakenly assumed America would supply oil in case the canal was closed, but Eisenhower was so angry he told them to “boil in their own oil.” Instead of supplies, Ike even imposed sanctions on the Allies! He indicated cease-fire was not enough and demanded withdraw by Britain, France, and Israel. He threatened economic reprisals if Israel did not withdraw. The Soviets threatened military action and the possible use of nukes, but Ike said a counter-attack would follow “as surely as night follows day.” On November 6, 1956, Eisenhower won a landslide over Adlai Stevenson, but the US government anger towards Britain, France, and Israel continued unabated. Ike indicated to his advisers that it was imperative not to “get Arabs sore at us,” as they might embargo oil shipments from the entire Middle East.

The British and French forces failed to establish a strong foothold and were forced to retreat in November. It was clear that without American aid, Western Europe would soon be out of oil and in serious trouble in the winter. To make matter worse, the British request for aid from the International Monetary Fund (IMF) was denied under the urging of the US, leading one British embassy official to indicate that the Americans were treating the Brits “as naughty boys who have got to be taught that they cannot go off on their own without asking Nanny’s permission first.” On November 9, Eisenhower considered with his National Security Council how to assist the Europeans through the Middle East Emergency Committee. However, he was adamant that there would be no such help until all British and French troops were out of Egypt. Finally, at the end of November, the Brits, French, & Israelis bailed out, and the Americans had carried the day and added to the defeat and humiliation of the British and French, and Nasser had won!

The Crisis Finally Ends

In December, the emergency supply program that was a cooperative venture between governments and oil companies in Europe and the US, dubbed “Oil Lift,” was fully in operation. To be successful, there was wholesale redeployment of tankers with the objective of moving oil in the quickest and most efficient manner. “Sugar Bowl,” the emergency supplies program in Europe, ensured equitable distribution among the European counties through the Petroleum Emergency Group created by the Organization of European Economic Cooperation (later the Organization of Economic Cooperation and Development, OECD). The Oil Lift involved significant coordination and logistics, and went so well it looked effortless. It should be pointed out, however, that the Texas RR Commission representing the independents refused to add supply, and it was only when the price per barrel was increased by 35 cents a barrel did they allow the supply of crude oil to increase for the emergency efforts.

In January 1957, Eden resigned and was replaced by Harold Macmillan, and, by the spring of 1957, the crisis had ended, the canal reopened for tankers to resume passage, and the pipelines from Iraq were reopened. The canal now belonged to Egypt and was operated by Egyptians, with Nasser as the clear winner. The crisis signaled the end of Britain as one of the major world powers. In addition, the two world wars and the divisions at home had drained its finances, confidence, and political will.

See caption below
British Foreign Minister Anthony Eden, (left) and President Eisenhower and John Foster Dulles in 1956, (right).
Credit: Public Domain via Wikimedia Commons

Clearly, during the Suez crisis, US focused on improving its position with the Arab oil producers and building up King Saud as an alternative to Nasser. Eisenhower made it clear to the Arab oil producers that he intended to work to “restore Middle East oil markets in Western Europe.” He also was intent on supporting stable pro-western governments to counter Soviet expansionism. These strategic objectives were shared by both Britain and France. The differences, clearly, were on the how or means and not the ends or goals. There was clear recognition of the need to heal the wounds, especially between the Americans and British, and both sides worked hard at it. The Suez crisis taught the Western powers about the volatility of the Middle East and the need to work to achieve long term peace and prosperity in the area. As a footnote, in 1970, fourteen years after the Suez crisis, at a dinner at 10 Downing Street in honor of Anthony Eden, then Lord Avon, Eden offered a special prayer for the British people to discover “a lake of oil” under the North Sea. Interestingly, that was exactly what they found shortly after. It would have been interesting what the British would have done in 1956 if they had known or even suspected they were sitting on such a lake.

Oil Transport Vulnerability: Alternatives to Suez Canal and Pipelines

The Suez Canal crisis and Syria’s interruption of the oil flow through the Iraq Petroleum Company pipelines showed the vulnerability of oil transportation and opened up discussions on alternatives to Suez canal and pipelines. The safer alternative was with supertankers going around the Cape of Good Hope. This provided lower political risk. The Japanese, with advances in diesel engines, and better steel, started to build supertankers capable of carrying a lot more oil. [If you double proportionately the measurements of a ship, you increase its size and cargo capacity by eight times.] The largest ships in the world are almost a ¼ mile long & half a football field wide with capacity 2 million barrels of oil (about the Japanese daily consumption). Besides, transport cost is only about 2¢ per gallon. Thus, the supertankers proved to be both economical and secure. In essence, the supertankers, the decline of British influence and prestige, and Nasser’s rise especially in the Arab world, were the major consequences of the Suez Canal crisis.

see caption for description
The supertanker AbQaiq is scheduled to take on an estimated 2 million barrels of crude oil.