OPEC : The Organisation that Slowly Dissolved Away
THE Vienna meeting of OPEC (Organisation of Petroleum Exporting Countries) held in the second week of July this year, was the latest one of a long series of confabulations, spanning the last year-and-a-half, seeking a way out of the current crisis—a glut of oil and continually weakening spot prices. That the July round proved abortive is not unexpected, considering the ineffectual nature of the earlier meetings. What marks the July round as a landmark in OPEC history is that as of July 10, 1982, the raison d'etre of OPEC—joint price fixation—was put into cold storage.
OPEC was a business arrangement; as long as it brought in rich hard currency dividends, it was convenient to bestow on the organisation qualities other than commercial as well. The Arabs who comprise the principal and most vocal section within OPEC, found in the organisation, not only an instrument to rake in dollars, but also a vehicle for their political apotheosis. The image of the Middle East potentates delivering a body blow to the West was greatly fostered by the Western media which credited the Arabs with the homegrown recession of the Western economies. The Arabs, in their turn, with oral support for Palestine and trickles of aid to select underdeveloped countries, bolstered this image in a bid to enhance their political standing in the Third World. This obscured the essential nature of OPEC and drove into the background the sea differences which existed in the situtations and aspirations of the different member-countries of OPEC—Saudi Arabia and the Sheikhdoms at the one end of the spectrum, Nigeria, Indonesia and Venezuela, at the other. The swollen stream of hard currency oil revenue which flowed into OPEC countries since 1973, and the different uses this revenue was put to, further exacerbated these differences. When such dissimilar partners enter into a cartel agreement, it requires an overriding compulsion for not breaking ranks. In fair weather, OPEC flourished, but it has proved itself unable to withstand the strains of adverse circumstances.
Between mid-1977 and early 1979, OPEC prices were steady. The price of Saudi light crude was 12.7 dollars per barrel. Subsequent hikes raised the price of Saudi light to 28 dollars per barrel in June 1980 and 32 dollars per barrel in December 1980. Since, from 1979 onwards, Saudi Arabia broke away from exactly applying OPEC price escalations on their own crude, the price increases of other crudes were