If only OPEC united against Political Saber-Rattling…

TEHRAN (Shana) -- The establishment of the Organization of the Petroleum Exporting Countries, or OPEC for short, 15 years after the end of World War II can be seen as a sign of the efforts of the founding countries to oppose and resist the extravagant behavior of major oil companies, or the famous seven sisters, at that time. In the years before foundation of OPEC, each of the founding countries, namely Iran, Venezuela, Iraq, Saudi Arabia and Kuwait, faced myriad political and social upheavals.

Venezuela, which had been seeking to establish the organization through its revolutionary oil minister, Juan Pablo Pérez Alfonzo, for an earlier while, ended a 10-year military rule two years before OPEC was put together. By this time, Iraq was two years away from the fall of its monarchy, and infighting had escalated among the revolutionaries, with its president speaking in circles about Kuwait's belonging to Iraq. Less than two years after OPEC’s establishment, the first Iraqi president was executed following a domestic coup, and the Ba'ath party came to power, which ruled the country until the fall of Saddam Hussein in the spring of 2003.

A decade before and a decade after the founding of OPEC, Kuwait faced opposition from the country's urbanization to Arab nationalism and a dichotomy in the social structure of urbanization and tribes. The Saudi monarchy was 28 years old at the time of OPEC’s birth, and the Saudi king had a conflict with one of his brothers, who was dethroned by his brother four years after OPEC was instituted, and finally, in Iran, seven years after the US-British coup against Dr. Mossadegh's administration, and despite nationalization of oil, presence of major oil companies from the US and Europe had taken over most of the nation’s oil industry.

A common feature of these countries was the weakness of economic and financial power despite sitting atop huge oil reserves. The presence of large oil companies, whether individually or in the form of joint ventures and the creation of consortia, had taken the exercise of real control over oil resources out of their hand.

Production and export of oil and certain petroleum products to other countries around the world, which sought to rebuild and modernize their industrial infrastructure after World War II, could lead to a surge in oil prices for producers given the increased demand for oil, while in practice more demand for oil not only did not increase the price of oil, which was less than $2 a barrel at that time, but also reduced it.

On the other hand, the oil majors operating in these countries did not undergo any flexibility to correct this trend, so despite the multiplicity of structure and sometimes political opposition of the founding countries to each other, they welcomed the preparations made in Egypt led by Venezuela and on September 14, 1960, OPEC was established in Baghdad with the approval of the official representatives of the five founding countries.

Membership of other countries from Asia, Africa and Latin America began a year after OPEC was established with Qatar in 1961, and the Congo in 2018. Each of these countries joined OPEC at a specific time and for various political and social reasons, and at times seceded or suspended their membership. Political developments in the years leading up to the establishment of OPEC and the change of governance in a number of the aforementioned countries led to the accession of these countries to OPEC. Indonesia's membership in 1961 was 15 years after independence from the Netherlands. Algeria joined in 1969, seven years after independence from France. Nigeria joined in 1971, eleven years after independence from Britain. Ecuador became a member in 1973, one year after the beginning of the second period of military rule in the country, with a history of Spanish presence. Gabon became a member in 1975, 15 years after its independence from France.

However, it should be noted that the change of governance in countries such as Libya and Iran and the collapse of their monarchies in 1969 and 1979, respectively, did not lead to their withdrawal from OPEC, while the suspension of membership and withdrawal from membership and re-membership by some other members such as Indonesia which suspended its membership in January 2009 and returned in January 2016 and again suspended its membership in November 2016, Gabon which left in January 1995 and rejoined in July 2016, Qatar which left in January 2019, Ecuador which suspended its membership in December 1992 and returned in October 2007 and withdrew from the organization in January 2020, were due to the decision-making conditions of the governments in these countries at different times for various reasons, including non-payment of OPEC membership fees, reduced oil exports and viewing gas exports more important than remaining an oil exporter.

Membership of other countries, such as Angola in 2007, was 32 years after its independence from Portugal; Equatorial Guinea joined in 2017, 49 years after its independence from Spain, and Congo joined OPEC in 2018, 58 years after its independence from Belgium. Such members joined the organization with the goal of wielding a more active presence in the international oil scene.

The history of direct and indirect presence of foreign forces, generally European and American, and long historical abuses against the people of these countries, which had rich hydrocarbon resources, especially oil, has lent OPEC a façade in the world as an organization that seeks to prevent the greed of colonial countries in the past and the current multinational corporations.

It is safe to say that OPEC is the only international organization of the under-developed countries in the world, each of whose members has suffered injuries from the looting and extravagance of foreign countries since time immemorial. However, this does not mean that all 13 current members of the organization are in line with a political line against the greed of alien powers, or share similar policies towards the oil market.

OPEC has long been overlooked by most analysts, especially in countries where the creation and presence of OPEC jeopardizes their interests. Employing “the oil cartel” to refer to OPEC, which is an international organization registered with the United Nations, does not either conform to the economic definition of the term “cartel,” nor is it supported by international legal literature. In fact, a number of OPEC members declared oil embargo against the United States and some other countries which supported the occupation of the Palestinian territories in the so-called Arab-Israeli war, outside of OPEC in 1973 on the basis of their multilateral agreement, which brought the price of oil from $5/b to $12/b, prompting the consuming countries to blame OPEC for the price rise and call it a cartel, while there is strong evidence that oil production was not economically justifiable for producers in the North Sea in the west of England and Alaska in North America at previous market prices. Simultaneously with the production of oil from these two regions, the dependence of Western consumers on the oil produced by OPEC countries, which wanted more independence, decreased; a factor that historical records indicate this price surge was premeditated. The non-reduction of oil prices at that time, despite the lifting of the embargo on oil exports by OPEC Arab member, whose initial decision was also outside the framework and OPEC, shows that this price increase was done to produce enough oil from these regions.

The ups and downs for OPEC and its members over the past 60 years require separate analysis, but OPEC has managed to pass behind the long war between two members (Saddam's imposed war on Iran) and the occupation of one member state by another (Saddam's occupation of Kuwait). Saddam's representative was quoted as saying in an official OPEC meeting before the occupation of Kuwait that the Kuwaiti representative should leave the meeting because there is no longer a country called Kuwait. Although this was not done, the representative privately informs the president of the meeting that he had said so as it was tasked upon him.

The differences in political interpretations of the events of the previous two decades have so far specifically led the two founding and senior members of the organization to take tough positions against each other, however, historical fairness dictates this point be noted that so long as the representatives of the two members have sought logical and reasonable solutions in specialized meetings, the national interests of all members have not been hindered and the desired results have been achieved. Obviously, any assembly of different countries needs impartiality between its members in order to create understanding and positive interaction with all members.

For this reason, although the decision-making power of a member in this organization depends on the impact of its production and export in the international arena, not paying enough attention to the need for cooperation with members with low production and exports in this organization can frustrate any member in being endorsed in the grouping.

It is not inconceivable that the United States and some other countries would prefer the dissolution of OPEC, while the 60-year history of this organization has shown that it has tried hard to made decisions not only to favor its members as oil producers, but also other producers and ensure the appropriate profitability to meet the needs of current and future generations of consumers; While those countries have weakened OPEC by weakening the position of a number of its members in various ways. The reduction in oil supplies of about 5 million barrels per day due to the civil war in Libya and the imposition of baseless unilateral sanctions is part of a plan that, unfortunately, some members of the organization are silent about or overlooked because of gaining part of the market share of these countries. This is an issue that could be addressed in the future in the event of a dispute between these members and those countries.

One of OPEC's most recent successes has been the cooperation of its members with a number of non-member oil-producing countries. Despite the flurry of criticisms regarding the choice of these countries, both in terms of current production level and the possibility of a natural decrease or increase, it should be noted that Russia's favorable cooperation with OPEC, contrary to the tradition of two decades ago, is commendable, but had all OPEC members spoke out against conversion of oil into a political tool and did not remain silent in the face of the problems created for countries whose oil supply to world markets has been minimized or reduced to zero, OPEC and its new allies would have wields much greater power in their decisions. This does not mean that joint action will prevent an increase in oil production in other countries that are not involved in this cooperation. Perhaps this expectation of cooperation between OPEC member countries and the diligent efforts to depoliticize oil, both by members and by consumers and other non-OPEC producers, should be expected of new-generation officials and managers in the oil industry; otherwise, continued oil conflicts can lead to delays in the economic development of all countries, not just those that have been or are being attacked by political assaults with oil as a weapon.

Finally, in order to make appropriate decisions in accordance with the history and background of OPEC, it is essential that in member countries, scientific and expert groups in various fields from oil to other matters related to this large industry to keep their studies up to date and provide their ideas for the future by providing reliable statistics and economic analyses, and at the same time, take enough heed of sending experts to the OPEC Secretariat, as any lack of attention to the necessary and appropriate quality at any level of work can reduce the position of member countries in this organization, and in general, the reports of this organization, which are presented for decision-making at the highest level, would not be considered by the main decision-makers of this organization, and the opinions of a small number of members would be cited for decisions instead of the collective opinion of all the members; This issue can deplete the capacity and weaken the scientific and professional bases of the reports of the organization, and as a result, in the medium term, the reports will become empty of effective ideas in the global oil market. In the hope of a bright future filled with pride for OPEC, and all the forces involved in the oil industry in OPEC countries and countries that spend their time for the betterment of humanity.

Hojjatollah Ghanimifard

News Code 307221


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