Saudi oil strategy tests limits of petro-power
Sitting atop the world's richest sea of oil is getting to be a lot less fun than it looks. Just ask precarious Saudi Arabia. The Saudis are on a mid-September bid for reinforced influence in Washington, in Arab diplomatic hallways, and within the Organization of Petroleum Exporting Countries (OPEC). Yet the campaign risks straining the limits of petro-power.
Upheaval in Iran, the Egyptian-Israeli peace accord penned two years ago Sept. 17, and Saudi internal unrest last November have helped draw these limits tighter than ever.
Saudi Arabia is OPEC's (and the world's) top oil exporter. It also happens to be the top foreign oil supplier for the United States; and key aid patron for a large, oil-less slice of the Arab world, including such center-stage actors as Syria and the Palestine Liberation Organization (PLO).
Indeed, the Saudis have so much of the slithery crude that, in these days of world oversupply, prices across the OPEC board depend on how many barrels Saudi Arabia pumps and exports. So the Saudis, not surprisingly, would like to use their oil leverage to:
* Reassert control over a fractious OPEC.
* Push through their relatively moderate brand of "Arab unity."
* Go to US officials and say: "Look, we can deliver or withhold concessions on the oil that you need. We can deliver or withhold Arab concessions on overall Mideast peace.
"Think of US interests. Start leaning on Israel. Work on a fair peace for the Palestinians that we and other Arabs can accept."
Amid verbal sniping from hard-liners such as Iran, the Saudis mounted stage one of their game plan at an OPEC ministers' conference winding down in Vienna on Sept. 16.
The Middle East Economic Survey, an oil newsletter on close terms with Saudi officials, said as the conference opened the Saudis had decided to trim their oil production by a million barrels a day Oct. 1. The magazine said a price hike for Saudi oil, the cheapest in OPEC, was also in the cards. This confirmed longstanding predictions by oil experts.
The idea is to swap a resultant firming of world prices for accord by more unruly OPEC states on a Saudi scheme for long-term pricing. That formula would shelve sudden price jolts in favor of gradual, regular quarterly increases -- restoring, at least temporarily, a measure of the Saudis' battered OPEC prestige.
The Saudi move, experts said, would also signal Washington that even traditionally pro-Western Arabs are incensed over what they see as a joint US-Israeli hard line on Mideast peace.
Enter, the limits of petro-power.
The Saudis may yet play out their plan. At this writing, there were conflicting reports from Vienna on how close OPEC was to reaching accord on the Saudi compromise.
But some hard-liners did make it clear they were not excited about retightening the Saudis' hold on the cartel, weakened in the pricing free-for-all triggered by the Iranian revolution. Brave new Iran, especially, wants both a Saudi production cutback and all the price hikes it can get.
The Saudis cannot appear to be pushed around by the Iranians. Appearances matter greatly in the Arab world, all the more so to a Saudi regime shaken by extremist unrest at Mecca's Great Mosque last year.
Indeed the Middle East Economic Survey suggested that Iranian "accusations . . . couched in impolite language" might make Saudi Arabia reconsider its price-and-production plans.
The Saudis must also tread carefully in seeking any Arab "peace" front with which to pressure Washington for Mideast concessions. The September 1978 Camp David summit formally took Egypt out of the Arab-Israeli conflict, setting off an open scramble for regional power.
The Saudis seem concerned that an overly anxious peace move, amid genuine Arab anger over current US diplomacy, could encourage mischief by unfriendly elements either at home or abroad.
So why not simply skip the preliminaries, show up in the White House, and unsheathe the Saudi "oil weapon"?
Although a gushy world oil market now rpovides a nice context for hiking prices and trimming production, the Saudis must be careful not to move too far, too quickly.
For that could encourage pressure from hard-line Arabs for a full-scale crude embargo. The Saudis, as much as any Western power, are "haves" in the world scheme of things are presumably would think twice before hobbling the international economic system.
The Saudis must also weigh the danger that overenergetic use of the "oil weapon" could backfire, igniting Americans in anger rather than cowing them into cooperation.