27 September 2020 - 17:42
  • News Code: 307751
Adeli: OPEC Politicized by Some Member States

TEHRAN (Shana) -- Mohammad Hossein Adeli, former secretary general of the Gas Exporting Countries Forum (GECF), has said some member states of the Organization of the Petroleum Exporting Countries have politicized the Organization. In an interview, he cites the examples of countries that did not hesitate to compensate for Iranian and Venezuelan share following their US sanctions on the two member states.

The following is the full text of the interview Adeli gave to "Iran Petroleum".

We are approaching the sixtieth anniversary of establishment of OPEC. Ever since its coming to existence, the Organization experienced many ups and downs. In your opinion, which were the turning point periods for the Organization and has OPEC been able to reach its planned objectives?

Let me first take this opportunity to congratulate OPEC members, especially those founders of OPEC on this sixtieth anniversary of establishment of the organization, which has really been effective in the world economy and in the energy scenes. On the episodes of OPEC, one may highlight some; in the 70s, of course there was an oil embargo in 1973 and 1974 which resulted in soaring of the prices and in making the oil market volatile. Also in 1979 because of the withdrawal of Iranian oil, due to the Islamic Revolution, again, there was a huge and sudden shortage of oil and this resulted in the hike in oil price. In 80s, the oil prices went down and was stabilized a bit but in late 80s the oil prices fell dramatically and of course it resulted into some economic hardship for oil producing countries. In 90s low oil prices stabilized but again, we had the financial crisis in 1998, which also adversely effected the oil market. In 2000, the oil prices started to gradually rise and peaked in 2008 and 2009; and it then stabilized until 2014 when again it fell down and stabilized in a normal range. Thus if one can somehow divide the episode of OPEC, one can say in 70s they had some sort of determination to take control of their sovereignty on oil and resulted into some dramatic developments in the oil market. In 80s, and 90s, of course the oil market was quite down because the consumer countries were playing actively in the market. Then, in 2000 the prices were again up but, since 2014, the oil market is constantly facing lots of volatilities. These challenges are emanated not only from the glut in the market, but also from global environmental consciousness, the rise of the gas, renewable energy, the tension between some countries in the middle east, as well as the competition among all energy producing countries such as USA, Russia and other OPEC and non-OPEC countries. Therefore, there are lots of factors that are impacting the oil market and making it as volatile as possible.

To what degree have members of the Organization been successful in converging their views and achieving their goals? To what degree have they been able to secure the independence of their decisions in OPEC?

In fact, in the first decade of the establishment of OPEC, cooperation level was higher among the members and most of them were somewhat adhering to the noble objectives of the Organization which was and still is to upgrade the wellbeing of their people and to accelerate the economic development of their country. But as a matter of fact, after 70s in the 80s and 90s, one may say that some OPEC members were not cooperating with one another and there were some sort of intervention or influence from the consuming countries and some OPEC members were quite aligning their decisions with those consuming countries. It was in this period that two groups in OPEC emerged. One of the groups consisted of those who were keen in increasing their revenues from their oil export to benefit their people and economy, and the second one consisted of those who were concerned about the volume of the oil in the market. The first group was oil price supporter, while the second pushed for market share and pouring more oil into the market. The champions of the first group were Iran, Algeria, Venezuela, Libya, Nigeria and Iraq, while the followers of the second group were Saudi Arabia, and the rest of Persian Gulf littoral States.  This is why OPEC was not that much effective or successful in meeting their own objectives and goals. As a result of dominance of the second group in OPEC the oil prices, in real terms, diminished and could not match the price inflation of exports of consuming countries which imported oil. For the time being, it is very difficult to define“the independence” of OPEC. One may say that the world economy and world energy have become so sophisticated that no single player or actor could really make decisions to change the whole market. Therefore, it needs some sort of consensus or cooperation among the players and actors of the global market. There are new ways and ways to maintain the independence or to achieve the goals.

This is why we see that OPEC and non-OPEC countries have come together and they are making some decisions together in order to really contribute to the stabilization of oil market.

How do you evaluate the solidarity among OPEC members in supporting each other? For instance, to what extent did OPEC members support Iran and Venezuela which are sanctioned by USA? And does it basically make sense for countries to extend support in oil market where everyone is fighting to get higher quotas?

Well, as I said in the early period of the establishment of the Organization, there used to be more unity and cooperation amongst the member countries. But in the past couple of decades with the external influences from the consuming countries and from competitors of OPEC, we see that such unity has been fading away. Not only there is some competition, but also one may see that politics are now well entrenched into the positions of some members.  Therefore, we see that when production of some members such as Iran and Venezuela are forcefully pushed out of the market, other members readily and sometimes willingly would jump to offset it and add to their temporary quotas. There is no willingness to sympathize with the sanctioned members and challenge the unjust pressure on their co-OPEC members. So one may say that the unity is very weak and no member may rely on the others to get support for such challenges. But one thing has now become some sort of rule. That is when the sanctioned countries are back into the market, then their share ought to be given back by those who took them before. This is some sort of cooperation that is expected to still exist among members.

HE Zangeneh as one of the highly experienced oil Ministers in OPEC, always believed that the oil share of those OPEC members which for whatever reason are left out of the market, should be allocated to other OPEC members and not among other non-OPEC, until they are back into the market and claim their shares. To what extent do you believe that under current circumstances such idea is feasible and executable?

Well, as I mentioned this is one of the areas where the members of OPEC may cooperate with each other. The past history in OPEC demonstrates that members who took the share of sanctioned or affected members when they were out of the market; the previously-sanctioned members gave back their shares when their situation became normal.  I think Minister Zangenehs view is quite practical and is the least expectation that a member or a founding member can expect from the others. I guess that the members should work together to make this option and this solution is quite practical. All members who have taken benefit from the lost market share of any member that has been pushed out of the market should cooperate and help the affected member to get back to normal conditions as soon as possible. I believe that this is a very reasonable position that Minister Zangeneh has taken and I believe that Iran and other OPEC members should push for such a position and make it as accepted rule among OPEC member countries.

Now that Iran has twice lost its market share during the past 10 years and currently is under U.S. sanctions, can one still regard it as an influential OPEC member? I ask this question referring to Minister Zangeneh’s frequent statements declaring that position of power of countries are based on their production capabilities and not on their reserves. Noting that globally Iran has the highest oil and gas reserves combined, but her production is low relative to its potential as well as experiencing strict limitation on oil export.

Well, I think it is reasonable to say that the effectiveness of the role of the members has very direct correlation with the production and market share. The more production and market share a member has, the more flexibility and maneuverability she would have in directing and affecting the oil market. But in the meantime I guess that the oil diplomacy or capacity to play a role is something beyond production levels, and some countries such as Iran have traditionally been experiencing such capacity in OPEC. As a matter of fact, let me take you to the history. Iran definitely inspired the world oil market in the developing countries in encouraging them to take control over sovereignty of their oil and natural resources.  This goes back to the time of Mossadeq when Iran Prime Minister Dr. Mossadeq managed to overcome the challenges and succeeded in the process of confrontation between Iran and the British oil company in the UN and also in the International Court of Justice. At that time it really inspired the world and when he returned from the United States where he attended the UN meeting and defended the position of Iran successfully, on his way back home he landed in Egypt, he was very much welcomed there and all historians agree that, the position of Iran inspired the third world in taking the sovereignty of their natural resources. Therefore, having this historical background, Iran was one of the founding members of OPEC and has always been pursuing a very active diplomacy in this organization and regardless of   the level of production; Iran has the capacity to play an effective role in OPEC. Although I believe that production and market share is practically the most fundamental factor in strengthening the position of the OPEC members, the diplomacy and the role of the member country is not limited to the relevant level, but it also goes back to the strength of the country, its history and its capacity regionally and globally. Iran is strong enough to have such a role.

To which years do you relate the most important turning point of Iran in OPEC? Can it be claimed that Iran has had an acceptable track record during past seven years in OPEC?

In fact, I guess that although Iran has experienced ups and downs in OPEC during the last four decades, yet in most of the time Iran has been successful in attracting the attention of some OPEC members in reaching consensus and defending oil prices vis-à-vis the other notion that was pushing for the market share. Therefore, one may say that Iran has been relatively successful in pushing for oil prices and oil revenues and this has been supported by many OPEC members, as well as people of these countries because this has at times resulted in boosting their revenues and making them richer and more capable to pursue their economic developments. But on the performance of Iran in the past seven years it could be argued that the past seven years has been the most difficult years for Iranian economy and on the top of that for Iran's oil sector. One can say that Iran has really been more successful than ever in responding to these challenges and creating some opportunities out of these challenges. Internally Iran’s economy has become more diverse and resilient than ever. But on OPEC challenges, Iran was quite successful in getting back its own share of the market and creating a precedence which was very difficult. Iran was out of the market for some years and had lost its market share, while other members had taken the share of Iran. It was up to Iran to defend its position to regain its market share. This was successfully done by Minister Zangeneh’s effective diplomacy. He should be definitely credited for such achievement.  It is fair to say that, this has now become a precedence, which will be quite helpful in the future. When, after the present time, it comes back to the market, there is a precedence. Those members who took Iran’s market share, should give back the share of Iran to her.This is not just for Iran, but for all those who are in the same position.

Do you think that there will come a day when OPEC and non-OPEC countries under the chapeau of OPEC Plus, will join together in order to prevent the dramatic drop of oil prices? How do you see the future of this agreement?

I guess that the world economy and the world of energy have become so much complicated and sophisticated that require some sort of coordination amongst all players. Although all the oil producing countries compete with each other, in order to contribute to the global economic development, one would say that we need some sort of harmony amongst the policies of the oil producing countries. Therefore, it is quite reasonable and wise to have such kind of cooperation, especially at the time that some producers have been creating many challenges nowadays. I guess now oil has become even more politicized than ever. Especially I should refer to the United States that is playing a political game in the oil and energy market and this has created confrontational environment and has adversely affected the stability of the oil market, as well as the stability of the economy of the oil producing countries. One could see and witness what happened to the most of the oil producing countries after 2014. It is widely believed that as a result of pressure exerted by the United States, Saudi Arabia hastily increased its production level and poured oil into the market with lower prices. This resulted in the fall of oil prices affecting the economies of all oil producing countries.  The irony was that Saudi Arabia itself suffered huge budget deficit. Still I guess that most of the Persian Gulf littoral states are suffering from the deficit which started from the fall of the oil prices after 2014. Therefore, such kind of harmonization or coordination could be assessed as reasonable.

Noting the Corona virus pandemic and that the time for improvement of global oil demand is unknown, what is the most threatening challenges for OPEC and its allies?

Well, in my opinion the most important challenge that OPEC members are facing now is lack of enough coordination and unity amongst OPEC members. It seems that OPEC members should be careful to prevent the malicious and confrontational policies pushed by Trump administration into the Middle East, not to spillover to the OPEC organization, and one can see that there are many challenges in this field. So, first of all OPEC members should come together and realize that they have a common responsibility and a common goal to meet. They are responsible towards their own people and if they want to really recover and prosper economically, they have to come together rather than challenging each other fiercely for the benefits of adversaries. This is number one. Number two, of course the oil market is facing another challenge from outside the OPEC and rest of the world. United States has increased its oil and gas production and using these two tools in advancing its adventurist foreign policies, which is very aggressive, and very coercive and in a unilateral way. The other challenge that of course the oil is facing, is that oil is a fossil fuel and the future belongs to the energies with less Carbon. So environmental issues and climate change as well as renewable energy are also another challenge. It is a fact that the share of fossil fuels in global energy basket is decreasing and this is another challenge that OPEC should face and gradually adapt to it.

by Negar Sadeghi

Courtesy of Iran Petroleum

News Code 307751

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