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>The 1973 Oil Embargo By OPEC Against The United States

How America and Saudi Arabia Solved The Oil Supply Problem and How We Can Work With Them Again

The Saudi view of religion is an important element of politics and economics. It contributed to the oil embargo that shook the Western World in the early 1970s. The reason I know about this is because I sat in those gas station lines for six months, thinking how could a bunch of second-rate nations, OPEC, do this to us, the richest and most powerful country in the world?

On October 6, 1973 (Yom Kippur, the holiest of Jewish holidays), Egypt and Syria launched simultaneous attacks on Israel. It was the beginning of the October War–the fourth and most destructive of the Arab-Israeli wars, and the one that would have the greatest impact on the world.

Egypt’s President Sadat pressured Saudi Arabia’s King Faisal to retaliate against the United States’ complicity with Israel by employing what Sadat referred to as “the oil weapon.” On October 16, Iran and the five Arab Gulf states, including Saudi Arabia, announced a 70 percent increase in the posted price of oil.

Meeting in Kuwait City, Arab oil ministers pondered further options. The Iraqi representative was vehemently in favor of targeting the U.S. He called on the other delegates to nationalize American businesses in the Arab world, to impose a total oil embargo on the United States and on all other nations friendly to Israel, and to withdraw Arab funds from every American bank. He pointed out that Arab bank accounts were substantial and that this action could result in a panic not unlike that of 1929.

Other Arab ministers were reluctant to agree to such a radical plan, but on October 17 they did decide to move forward with a more limited embargo, which would begin with a 5 percent cut in production and then impose an additional 5 percent reduction every month until their political objectives were met. They agreed that the U.S. should be punished for its pro-Israeli stance and should therefore have the most severe embargo levied against it.

Several of the countries attending the meeting announced that they would implement cutbacks of 10 percent, rather than 5 percent.

On October 19, President Nixon asked Congress for $2.2 billion in aid to Israel. The next day, Saudi Arabia and other Arab producers imposed a total embargo on oil shipments to the United States. The oil embargo ended on March 18, 1974. Its duration was short, its impact immense. The selling price of Saudi oil leaped from $1.39 a barrel on January 1, 1970 to $8.32 on January 1, 1974. Politicians and future administrations would never forget the lessons learned during the early-to mid-1970s. In the long run, the trauma of those few months served to strengthen the country’s planning; it’s three pillars–big corporations, international banks, and government–bonded as never before. That bond would endure even until today.

The embargo also resulted in significant attitude and policy changes. It convinced Wall Street and Washington that such an embargo could never again be tolerated. Protecting our oil supplies had always been a priority; after 1973, it became an obsession. The embargo elevated Saudi Arabia’s status as a player in world politics and forced Washington to recognize the kingdom’s strategic importance to our own economy. It encouraged U.S. corporatocracy leaders to search desperately for methods to funnel petrodollars back to America, and to ponder the fact that the Saudi government lacked the administrative and institutional frameworks to properly manage its mushrooming wealth.

The additional oil income resulting from the price hikes was a mixed blessing for Saudi Arabia. It filled the national coffers with billions of dollars; however, it also served to undermine some of the strict religious beliefs of the Wahhabis. Wealthy Saudis traveled around the world. They attended schools and universities in Europe and the United States. They bought fancy cars and furnished their houses with Western-style goods. Conservative religious beliefs were replaced by a new form of materialism—and it was this materialism that presented a solution to fears of future oil crises.

Almost immediately after the embargo ended, Washington began negotiating with the Saudis, offering them technical support, military hardware and training, and an opportunity to bring their nation into the twentieth century, in exchange for petrodollars and, most importantly, assurances that there would never again be another oil embargo. The negotiations resulted in the creation of a most extraordinary, the United States-Saudi Arabian Joint Economic Commission. Known as JECOR, it embodied an innovative concept that was the opposite to traditional foreign aid programs; it relied on Saudi money to hire American firms to build up Saudi Arabia.

Although overall management and fiscal responsibility were delegated to the U.S. Department of Treasury, this commission was independent to the extreme. Ultimately it would spend billions of dollars over a period of twenty-five years, with virtually no congressional oversight. Because no U.S. funding was involved, Congress had no authority in the matter, despite Treasury’s role. After studying JECOR extensively, David Holden and Richard Johns concluded: “It was the most far-reaching agreement of its kind concluded by the U.S. with a developing country. It had the potential to entrench the U.S. deeply within the kingdom, fortifying the concept of mutual interdependence. (David Holden and Richard Johns. The House of Saud: The Rise and Fall of The Most Powerful Dynasty in The Arab World (New York: Holt Rinehart and Winston, 1981, p. 358.)

The above, excerpted from John Perkins’ book, Confessions of An Economic Hit Man, is an effort to teach our readers how presidents clear back to Roosevelt have dealt with energy and how we must deal with it in the future until we become energy independent.

>John Perkins–An Economic Hit Man

>The Secret History of The American Empire

John Perkins

Born: 1945

Gender: Male
Race or Ethnicity: White
Sexual orientation: Straight
Occupation: Activist

Nationality: United States
Executive summary: Confessions of an Economic Hit Man

Daughter: Jessica

University: School of Business Administration, Boston University (1968)

Peace Corps 1968-71
Draft Deferment: Vietnam

Official Website:

Author of books:
The Stress-Free Habit: Powerful Techniques for Health and Longevity from the Andes, Yucatan, and the Far East (1989)
The World is As You Dream It (1994, spiritualism)
Shapeshifting: Techniques for Global and Personal Transformation (1997, spiritualism)
Psychonavigation: Techniques for Travel Beyond Time (1999, spiritualism)
Spirit of the Shuar: Wisdom from the Last Unconquered People of the Amazon

(2001, spiritualism)

This author has a copy of Perkins’ book Confessions of an Economic Hit Man in his lap as he writes. It is a most compelling read, one I could recommend to anyone. It flows almost like a Graham Greene novel, it’s so good. But tragically, it is all true according to the man who lived the life of an EHM (Economic Hit Man).

Read some of what Perkins has to say in the book:

by John Perkins

“Economic hit men,” John Perkins writes, “are highly paid professionals who cheat countries around the globe out of trillions of dollars. Their tools include fraudulent financial reports, rigged elections, payoffs, extortion, sex, and murder.”

John Perkins should know—he was an economic hit man for an international consulting firm that worked to convince developing countries to accept enormous loans and to funnel that money to U.S.corporations. Once these countries were saddled with huge debts, the American government and international aid agencies were able to request their “pound of flesh” in favors, including access to natural resources, military cooperation, and political support.
Praise for Confessions of an Economic Hitman

“A bombshell. One of those rare instances in which someone deeply entrenched in our governmental/corporate imperialist structure has come forward to reveal in unequivocal terms its inner workings. A work of great insight and moral courage.”—John E. Mack, Harvard professor

“Here are the real-life details—nasty, manipulative, plain evil—of international corporate skullduggery spun into a tale rivaling the darkest espionage thriller.” —Greg Palast, author of The Best Democracy Money Can Buy
Quotes from Confessions of an Economic Hitman

Quito, Ecuador’s capital, stretches across a volcanic valley high in the Andes, at an altitude of nine thousand feet. Residents of this city, which was founded long before Columbus arrived in the Americas, are accustomed to seeing snow on the surrounding peaks, despite the fact that they live just a few miles south of the equator. The city of Shell, a frontier outpost and military base hacked out of Ecuador’s Amazon jungle to service the oil company whose name it bears, is nearly eight thousand feet lower than Central + South America: A street in the hilly capital city of Quito.Quito. A steaming city, it is inhabited mostly by soldiers, oil workers, and the indigenous people from the Shuar and Kichwa tribes who work for them as prostitutes and laborers.

To journey from one city to the other, you must travel a road that is both tortuous and breathtaking. Local people will tell you that during the trip you experience all four seasons in a single day. Although I have driven this road many times, I never tire of the spectacular scenery. Sheer cliffs, punctuated by cascading waterfalls and brilliant bromeliads, rise up one side. On the other side, the earth drops abruptly into a deep abyss where the Pastaza River, a headwater of the Amazon, snakes its way down the Andes. The Pastaza carries water from the glaciers of Cotopaxi, one of the world’s highest active volcanoes and a deity in the time of the Incas, to the Atlantic Ocean over three thousand miles away.

In 2003, I departed Quito in a Subaru Outback and headed for Shell on a mission that was like no other I had ever accepted. I was hoping to end a war I had helped create. As is the case with so many things we EHMs must take responsibility for, it is a war that is virtually unknown anywhere outside the country where it is fought. I was on my way to meet with the Shuars, the Kichwas, and their neighbors the Achuars, the Zaparos, and the Shiwiars—tribes determined to prevent our oil companies from destroying their homes, families, and lands, even if it means they must die in the process. For them, this is a war about the survival of their children and cultures, while for us it is about power, money, and natural resources. It is one part of the struggle for world domination and the dream of a few greedy men, global empire.

That is what we EHMs do best: we build a global empire. We are an elite group of men and women who utilize international financial organizations to foment conditions that make other nations subservient to the corporatocracy running our biggest corporations, our government, and our banks. Like our counterparts in the Mafia, EHMs provide favors. These take the form of loans to develop infrastructure—electric generating plants, highways, ports, airports, or industrial parks. A condition of such loans is that engineering and construction companies from our own country must build all these projects. In essence, most of the money never leaves the United States; it is simply transferred from banking offices in Washington to engineering offices in New York, Houston, or San Francisco.

Despite the fact that the money is returned almost immediately to corporations that are members of the corporatocracy (the creditor), the recipient country is required to pay it all back, principal plus interest. If an EHM is completely successful, the loans are so large that the debtor is forced to default on its payments after a few years. When this happens, then like the Mafia we demand our pound of flesh. This often includes one or more of the following: control over United Nations votes, the installation of military bases, or access to precious resources such as oil or the Panama Canal. Of course, the debtor still owes us the money—and another country is added to our global empire.

Driving from Quito toward Shell on this sunny day in 2003, I thought back thirty-five years to the first time I arrived in this part of the world. I had read that although Ecuador is only about the size of Nevada, it has more than thirty active volcanoes, over 15 percent of the world’s bird species, and thousands of as-yet-unclassified plants, and that it is a land of diverse cultures where nearly as many people speak ancient indigenous languages as speak Spanish. I found it fascinating and certainly exotic; yet, the words that kept coming to mind back then were pure, untouched, and innocent. Much has changed in thirty-five years.

At the time of my first visit in 1968, Texaco had only just discovered petroleum in Ecuador’s Amazon region. Today, oil accounts for nearly half the country’s exports. A trans-Andean pipeline built shortly after my first visit has since leaked over a half million barrels of oil into the fragile rain forest—more than twice the amount spilled by the Exxon Valdez. Today, a new $1.3 billion, three hundred-mile pipeline constructed by an EHM-organized consortium promises to make Ecuador one of the world’s top ten suppliers of oil to the United States. Vast areas of rain forest have fallen, macaws and jaguars have all but vanished, three Ecuadorian indigenous cultures have been driven to the verge of collapse, and pristine rivers have been transformed into flaming cesspools.

During this same period, the indigenous cultures began fighting back. For instance, on May 7, 2003, a group of American lawyers representing more than thirty thousand indigenous Ecuadorian people filed a $1 billion lawsuit against ChevronTexaco Corp. The suit asserts that between 1971 and 1992 the oil giant dumped into open holes and rivers over four million gallons per day of toxic wastewater contaminated with oil, heavy metals, and carcinogens, and that the company left behind nearly 350 uncovered waste pits that continue to kill both people and animals.

Outside the window of my Outback, great clouds of mist rolled in from the forests and up the Pastaza’s canyons. Sweat soaked my shirt, and my stomach began to churn, but not just from the intense tropical heat and the serpentine twists in the road. Knowing the part I had played in destroying this beautiful country was once again taking its toll. Because of my fellow EHMs and me, Ecuador is in far worse shape today than she was before we introduced her to the miracles of modern economics, banking, and engineering. Since 1970, during this period known euphemistically as the Oil Boom, the official poverty level grew from 50 to 70 percent, under- or unemployment increased from 15 to 70 percent, and public debt increased from $240 million to $16 billion. Meanwhile, the share of national resources allocated to the poorest segments of the population declined from 20 to 6 percent.

Unfortunately, Ecuador is not the exception. Nearly every country we EHMs have brought under the global empire’s umbrella has suffered a similar fate. Third world debt has grown to more than $2.5 trillion, and the cost of servicing it—over $375 billion per year as of 2004—is more than all third world spending on health and education, and twenty times what developing countries receive annually in foreign aid. Over half the people in the world survive on less than two dollars per day, which is roughly the same amount they received in the early 1970s. Meanwhile, the top 1 percent of third world households accounts for 70 to 90 percent of all private financial wealth and real estate ownership in their country; the actual percentage depends on the specific country.

The Subaru slowed as it meandered through the streets of the beautiful resort town of Banos, famous for the hot baths created by underground volcanic rivers that flow from the highly active Mount Tungurahgua. Children ran along beside us, waving and trying to sell us gum and cookies. Then we left Banos behind. The spectacular scenery ended abruptly as the Subaru sped out of paradise and into a modern vision of Dante’s Inferno A gigantic monster reared up from the river, a mammoth gray wall. Its dripping concrete was totally out of place, completely unnatural and incompatible with the landscape. Of course, seeing it there should not have surprised me. I knew all along that it would be waiting in ambush. I had encountered it many times before and in the past had praised it as a symbol of EHM accomplishments. Even so, it made my skin crawl.

That hideous, incongruous wall is a dam that blocks the rushing Pastaza River, diverts its waters through huge tunnels bored into the mountain, and converts the energy to electricity. This is the 156- megawatt Agoyan hydroelectric project. It fuels the industries that make a handful of Ecuadorian families wealthy, and it has been the source of untold suffering for the farmers and indigenous people who live along the river. This hydroelectric plant is just one of many projects developed through my efforts and those of other EHMs. Such projects are the reason Ecuador is now a member of the global empire, and the reason why the Shuars and Kichwas and their neighbors threaten war against our oil companies.

Because of EHM projects, Ecuador is awash in foreign debt and must devote an inordinate share of its national budget to paying this off, instead of using its capital to help the millions of its citizens officially classified as dangerously impoverished. The only way Ecuador can buy down its foreign obligations is by selling its rain forests to the oil companies. Indeed, one of the reasons the EHMs set their sights on Ecuador in the first place was because the sea of oil beneath its Amazon region is believed to rival the oil fields of the Middle East. The global empire demands its pound of flesh in the form of oil concessions.

These demands became especially urgent after September 11, 2001, when Washington feared that Middle Eastern supplies might cease. On top of that, Venezuela, our third-largest oil supplier, had recently elected a populist president, Hugo Chavez, who took a strong stand against what he referred to as U.S. imperialism; he threatened to cut off oil sales to the United States. The EHMs had failed in Iraq and Venezuela, but we had succeeded in Ecuador; now we would milk it for all it is worth.

Ecuador is typical of countries around the world that EHMs have brought into the economic-political fold. For every $100 of crude taken out of the Ecuadorian rain forests, the oil companies receive $75. Of the remaining $25, three-quarters must go to paying off the foreign debt. Most of the remainder covers military and other government expenses—which leaves about $2.50 for health, education, and programs aimed at helping the poor. Thus, out of every $100 worth of oil torn from the Amazon, less than $3 goes to the people who need the money most, those whose lives have been so adversely impacted by the dams, the drilling, and the pipelines, and who are dying from lack of edible food and potable water.

All of those people—millions in Ecuador, billions around the planet—are potential terrorists. Not because they believe in communism or anarchism or are intrinsically evil, but simply because they are desperate. Looking at this dam, I wondered—as I have so often in so many places around the world—when these people would take action, like the Americans against England in the 1770s or Latin Americans against Spain in the early 1800s.

The subtlety of this modern empire building puts the Roman centurions, the Spanish conquistadors, and the eighteenth- and nineteenth-century European colonial powers to shame. We EHMs are crafty; we learned from history. Today we do not carry swords. We do not wear armor or clothes that set us apart. In countries like Ecuador, Nigeria, and Indonesia, we dress like local schoolteachers and shop owners. In Washington and Paris, we look like government bureaucrats and bankers. We appear humble, normal. We visit project sites and stroll through impoverished villages. We profess altruism, talk with local papers about the wonderful humanitarian things we are doing. We cover the conference tables of government committees with our spreadsheets and financial projections, and we lecture at the Harvard Business School about the miracles of macroeconomics. We are on the record, in the open. Or so we portray ourselves and so are we accepted. It is how the system works. We seldom resort to anything illegal because the system itself is built on subterfuge, and the system is by definition legitimate.

However—and this is a very large caveat—if we fail, an even more sinister breed steps in, ones we EHMs refer to as the jackals, men who trace their heritage directly to those earlier empires. The jackals are always there, lurking in the shadows. When they emerge, heads of state are overthrown or die in violent “accidents.” And if by chance the jackals fail, as they failed in Afghanistan and Iraq, then the old models resurface. When the jackals fail, young Americans are sent in to kill and to die.

As I passed the monster, that hulking mammoth wall of gray concrete rising from the river, I was very conscious of the sweat that soaked my clothes and of the tightening in my intestines. I headed on down into the jungle to meet with the indigenous people who are determined to fight to the last man in order to stop this empire I helped create, and I was overwhelmed with feelings of guilt. How, I asked myself, did a nice kid from rural New Hampshire ever get into such a dirty business?
Copyright 2006 John Perkins
Table of Contents of Confessions of an Economic Hitman
PART I: 1963-71
1: An Economic Hit Man Is Born
2: “In for Life”
3: Indonesia: Lessons for an EHM
4: Saving a Country from Communism
5: Selling My Soul
PART II: 1972-74
6: My Role as Inquisitor
7: Civilization on Trial
8: Jesus – Seen Differently
9: Opportunity of a Lifetime
10: Panama: the President and Hero
11: Pirates in the Canal Zone
12: Soldiers and Prostitutes
13: Conversations with the General
14: Meeting the Novelist Graham Greene
PART III: 1974 – 81
15: Entering a New and Sinister Period in Economic History
16: The Saudi Arabian Money-laundering Affair
17: Financing Osama Bin Laden
18: Panama Canal Treaty Negotiations
19: Iran’s King of Kings
20: Confessions of a Tortured Man
21: The Fall of a King
22: Colombia: Keystone to Latin America
23: American Democracy Vs. Global Empire
24: Ecuador’s President Battles Big Oil
25: I Quit
Part IV: 1982 – Present
26: Ecuador: Presidential death – CIA Assassination?
27: Panama: Another Presidential death – CIA Assassination?
28: My Own Energy Company, Enron, and G. W. Bush
29: A New Breed of EHM
30: U.S. Invades Panama
31: Venezuela: Another EHM Failure
32: Ecuador Revisited
About John Perkins

JOHN PERKINS was recruited by the National Security Agency during his last year at Boston University’s School of Business Administration, 1968. He spent the next three years in the Peace Corps in South America and then in 1971 joined the international consulting firm of Chas. T. Main, a Boston-based company of 2000 employees that kept a very low profile. As Chief Economist and Director of Economics and Regional Planning at MAIN, his primary job was to convince Less Developed Countries (LDCs) around the world to accept multibillion dollar loans for infrastructure projects and to see to it that most of this money ended up at MAIN, Bechtel, Halliburton, Brown and Root, and other U.S. engineering/construction companies. The loans left the recipient countries wallowing in debt and highly vulnerable to outside political and commercial interests.

Perkins resigned his position at MAIN in 1981. He founded and became CEO of Independent Power Systems, pioneering technologies that promoted the use of “waste” power plant heat in hydroponic greenhouses and other cogeneration applications. In 1990, he sold IPS and founded a nonprofit organization, Dream Change Coalition, which works closely with Amazonian and other indigenous people to help preserve their environments and cultures.

John began writing Confessions of an Economic Hit Man several times during the past two decades. He was persuaded to stop by lucrative business offers that were contingent on his silence. “Now,” he says, “we have entered the new millennium. Nine-eleven happened. My daughter has grown up and left home. The time has come. . .”