Shortly after that in 1986, William Casey, then Director of the US Central Intelligence Agency, went to Saudi Arabia. According to Ronald Reagan’s national security adviser Richard Allen, Casey negotiated with King Fahd what was to occur next. For the six previous years, the Saudi government has been restraining oil prices, sharply decreasing their petroleum extraction; but after Casey returned, in September 1985, Saudi Arabia started rapidly increasing its extraction – even though the prices were still low!
In four months, Saudi extraction rose from two million to 10 million barrels a day, and prices plummeted from $32 a barrel to $10. For the USSR’s economy - already accustomed to exorbitant incomes from its oil, this was a death blow. in 1986 alone, the USSR lost more than $20 billion (approximately 7.5% of the USSR’s annual income), and it already had a budget deficit.
But Saudi Arabia’s economy was also punished because of the low prices! Why did they do it? Allen’s opinion is that Casey offered the sheiks financial reparations in exchange for the move; this opinion is backed up by the fact that in 1986, 80% of Saudi oil was sold through Exxon, Mobil, Texaco, and Chevron – all American companies.