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The Mideast Oil Connection: A gold rush that ended

Last of three parts: Even several Steelers got into the act when Pittsburgh companies followed the scent of Middle Eastern oil

Wednesday, March 19, 2003

By Dan Fitzpatrick, Post-Gazette Staff Writer

Pittsburgh investment banker Sam Zacharias still has the first Riyal he and his partner Andy Russell made in the Middle East. The Saudi Arabian currency is next to his desk, embedded in a plastic casing. Zacharias reads the label. "Andy Russell, Sam Zacharias, first overseas earnings, April 1976, Dhahran, Saudi Arabia.'"


Part One: How Mellon money and the Gulf Oil giant it spawned helped to create and shape the Middle East.

Part Two: For one young Mellon banker a Middle East assignment opened up a world of oil, riches and Saudi finance.


"We were pioneers," he added.

Other than Gulf Oil Co., Mellon Bank and big companies such as Westinghouse Electric and Mine Safety Appliances, Zacharias and his partner, a linebacker for the Steelers, were among the first in Pittsburgh to make money in the Middle East.

They were quick to realize what they had to sell: Steelers football. That first contract, which netted the duo $100,000 in profits and helped build three inflatable warehouses for a Saudi oil company, was the result of the Middle Eastern football clinics Zacharias and Russell staged in the 1970s -- during the height of the Steelers' popularity and success as a team.

The role of the black and gold is one of many connections tying Pittsburgh business to the Middle East. In a three-part series that concludes today, the Post-Gazette traces those connections to the development of the region, now on the brink of war.

While not critical to the formation of the modern Middle East, the contributions of the Steelers were emblematic of a time when, "The money was flowing like there was no tomorrow," said Sewickley native Frank Hawkins, Mideast bureau chief for the Associated Press in the 1970s.

The first Steeler to arrive was Frank Atkinson, who played for the team in 1963-64 and moved to Beirut, Lebanon, in 1974. Armed with an MBA from Stanford University, Atkinson worked as a vice president for Triad International Marketing, a company controlled by Saudi billionaire and arms trader Adnan Khashoggi. Atkinson's job was to help Khashoggi, who would later become a key figure in the 1980s Iranian arms-for-hostages deal that became known as the "Iran-Contra" affair. Khashoggi wanted to work with Western companies interested in doing business in oil-rich Saudi Arabia.

Atkinson, who recalls the time as "a gold rush," suggested that Russell, his former teammate and part-time investment banker, take a look at the Middle East. Russell made his first trip in 1975, taking with him copies of a Steelers Super Bowl highlight film. At the first screening of the film, in Kuwait, the first 30 rows were "a sea of white robes," Russell said, and many of them were Kuwaitis who had studied at football-crazy American schools such as the University of Southern California, the University of Oklahoma and the University of Texas.

After the screening, Kuwait Undersecretary of Oil Sheik Mahmoud Adassani asked Russell to return with his favorite football player, Steelers wide receiver Lynn Swann, and Russell delivered, bringing back Swann, Ray Mansfield and eventually ex-Steelers Mike Wagner and Mel Blount.

While Russell and his partner Sam Zacharias tried to persuade the Arabs to invest in real estate deals or oil and gas programs, the players would conduct football clinics in the desert, walking the children of oil officials through agility and coordination drills.

"It turned out to be a wonderful thing for us," Zacharias said.

The abundant wealth of the Middle East was everywhere during those years. One night, Russell and Zacharias attended a cocktail party at the Saudi Arabian home of Rick Petterson, a Mellon Bank executive who worked with the National Commercial Bank, the largest in Saudi Arabia. Petterson introduced Russell to a Saudi who invested the government's money. As Russell recounts the meeting in a book, "A Steeler Odyssey," he asked the Saudi how much he was responsible for investing.

"One hundred million dollars" was the answer.

"A day."

That kind of wealth attracted scores of Pittsburghers to the Middle East in the 1970s -- a decade when the earnings of the oil exporting countries in the that part of the world went from $23 billion to $140 billion and the Saudi kingdom became a repository for 25 percent of the world's known oil reserves.

Like many of the Middle East nations that lacked wealth when the American and British oil companies began dividing up petroleum-digging rights in the early part of the 20th century, Saudi Arabia used oil to attain economic and political power through the 1940s, '50s and '60s. The nation became wealthier in the 1970s, helped by an oil embargo that made petroleum more scarce and thus more valuable. As Saudi Arabia built up large surpluses, though, there were concerns that the sudden wealth now languishing in reserves would pull down the world economy. So Saudi Arabia found an outlet for its money by launching a $150 billion development plan for roads, waterlines, sewer treatment plants, telephones, electricity lines, homes, hospitals and schools.

It was that development plan that created more opportunities for Pittsburgh companies.

Westinghouse Electric had 350 people stationed in Saudi Arabia during that decade and another 1,500 in Iran, going after contracts to build power plants, provide turbine generators and supply military equipment. Dravo Corp. was there, too, as was O'Hara-based Mine Safety Appliances, which did its first Middle East business in the 1930s, according to company chairman John Ryan III, selling protective equipment and instruments to the oil companies operating in that region.

Mine Safety Appliances still has a handful of employees working in a sales office in the United Arab Emirates, where the company sells to clients in Kuwait, Saudi Arabia, Bahrain, Qatar and Oman. ASIRobicon, which employs 400 people in New Kensington, makes industrial motors for clients in Qatar, Kuwait and Saudi Arabia. Alcoa has 91 employees working for a joint venture in Bahrain that produces plastic caps for soda and juice bottles. And Moon-based Cutler-Hammer, which makes electrical controls and power distribution products, still has a handful of offices in the Middle East.

Despite the ongoing work of local companies, Pittsburgh's involvement in the fortunes of the Middle East hasn't approached what it was in the 1970s or the early part of the 20th century. Westinghouse pulled its people out of Iran in 1978, anticipating the fall of the shah and a corresponding rise in anti-American sentiment. Mellon ended its relationship with the National Commercial Bank in 1979, by selling its interest in First Boston.

Gulf Oil's influence began to ebb once Middle Eastern countries, wanting more control over their oil profits, started nationalizing the companies that had been pumping petroleum out of the ground since the 1930s. Iraq nationalized its oil in 1972. Saudi Arabia did it in 1976.

Kuwait, where Gulf discovered oil in 1938, removed its oil from private ownership in 1975, serving as the end of an era for the former Pittsburgh-based petroleum giant. While there was talk later of compensating Gulf for its loss of the exclusive Kuwaiti contract,"They didn't want to compensate us at all," said Herbert Goodman, former president of Gulf Oil's international sales, trading and supply division and the person who led those discussions for Gulf.

"We indicated what we had invested and demonstrated that. The Kuwaitis just waved it away and said, 'You have been adequately compensated. You have made a lot of money out of here, and we don't feel we owe you anything.'"

Fred Kellinger, former assistant to the chairman at Gulf and the last person to leave its offices Downtown after Gulf's 1984 merger with Chevron, said in an interview that the Kuwaitis understood "the game."

"It's business; it's truly business," he said. "Beyond that, I really don't give much thought as to whether we did them a favor by developing it. In a sense, it was a help to them. We didn't do it with an altruistic bent. We went out to find oil, pump it and make a profit."


Dan Fitzpatrick can be reached at dfitzpatrick@post-gazette.com or 412-263-1752.

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