OPEC still a force to be reckoned with

By Dan Atkinson

LONDON: The Organization of Petroleum Producing Countries (OPEC), once associated with lights going out, queues at the petrol pumps and worldwide inflation, is back. It may not be -- to use showbusiness jargon -- bigger and badder than ever, but 40-years-old this year, the 11-country cartel is leaner, fitter and more professional.

It no longer serves as a multi-purpose forum for a range of obsessions: pro-Third World, pro-conservation, anti-west and anti-oil-price targets and even thinking of putting its production quotas on a bureaucratic autopilot, taking much of the political haggling (and the fun) out of OPEC summits.

The west seems unconvinced the beast has been tamed; President Clinton has made belligerent noises about OPEC's remarkably successful cuts package, doubtless haunted by the memory of what the cartel helped to do to the last Democrat president -- Jimmy Carter.

But few know what OPEC is or how it works. It remains strongly influenced by Middle Eastern concerns, not least because of Saudi Arabia's pivotal position in OPEC production. The Saudis' April 1999 OPEC quota was 7.4 million barrels per day, about a third of the total. Saudi Arabia has been able to knock heads together inside the cartel whenever political feuding has threatened to sabotage its operations.

There are suggestions that this happened most recently in 1998/1999, when Saudi Arabia reportedly threatened to abandon quotas altogether and go for volume, pumping as much oil as physically possible.

Given the low cost of the Saudi fields, which allows for profit even at very low prices, this threat would have been enough to ensure the signing of the successful spring 1999 cuts package.

Officially, the cartel is a voluntary organization of sovereign states whose decision-making body is the twice-yearly OPEC conference, the oil ministers' summit. In reality, much of the quota-haggling is thrashed out ahead of the conferences.

And the conference effectively reconstitutes itself from time to time as the "ministerial monitoring committee" to make recommendations to the conference (i.e. to itself).

In this way, OPEC is in more or less permanent session -- useful for an organization whose quota packages require unanimous agreement. There is nothing hard and fast about the twice-yearly summit rule: extra summits can be called whenever the need arises.

OPEC's secretariat, originally based in Geneva, is now housed in Vienna, providing the bureaucratic back-up for the oil ministers.

Aligned with OPEC is a floating group known as NOPEC, made up of oil-producing countries sympathetic to OPEC's aims and willing to fall in, unofficially, with production curbs. Present "members" include Mexico, Norway, Oman and Russia. Occasional OPEC-NOPEC get-together reinforce OPEC's culture of the "permanent summit". In August Saudi and Venezuelan oil ministers met their Mexican counterpart in Caracas.

With OPEC's share of proven oil reserves set to rise in the coming 25 years from 40 percent to 50 percent, this new professionalism could make the cartel even more of a worry to the west.

-- Guardian News Service