Saudi Arabia hopes to douse OPEC fire

There will be lots of kicking and screaming at the special OPEC meeting next week in Vienna.

But after the tantrums subside, the members of the oil cartel will behave themselves and do what Saudi Arabia wants them to do. This is the scenario spelled out by oil industry analysts.

Libya began its protests early -- which, analysts say, is not surprising, given the volatility of Libyan leader Muammar Qaddafi. What is surprising, they say, is just how acidic Qaddafi has been toward Saudi Arabia.

''Saudi Arabia has flooded the world market with its oil,'' Colonel Qaddafi was quoted by the Libyan national news agency as saying. ''It is selling its oil cheap, and by doing this it is declaring its open alliance with Israel and America against Libya and other nations who depend on oil for their livelihood.''

''These nations now face an economic blockade ordered by America and executed by Saudi Arabia,'' Qaddafi said.

''We were patient with the Saudi policy of starving our nation and the nations which depend on oil for their livelihood. For us now, Saudi Arabia is enemy No. 1. . . . It is also the enemy No. 1 of Islam,'' he said.

Observers say that although it is not unusual to have an Arab leader talking about plots behind every door, it is quite something to have even Qaddafi so bitterly criticize Saudi Arabia's Islamic dedication.

What Qaddafi's remarks appear to reflect is his deep concern over Libyan oil sales. And if he is that worried, several other OPEC members have to be more than mildly concerned as well, industry sources point out.

For the first time since Qaddafi came to power in 1969, Libya has had to borrow $250 million internationally to cover its budget in order to not touch its estimated $30 billion reserves.

A Gulf Oil Corporation report figured Libya needed to produce 1.3 million barrels a day to make its $16.5 million budget. Industry sources say it is pumping only about 600,000 barrels daily. And banking sources here say Libya's oil revenue has fallen by two-thirds.

The problem for OPEC is that Libya's predicament is not the worst among its 13 members.

Nigeria has 80 million mouths to feed. And aside from its depressed oil industry, the rest of the Nigerian economy is a mess, says Robin Mannock, managing editor of the authoritative oil newsletter Arab Report and Memo.

Algeria, Indonesia, Iran, Iraq, and Venezuela also have enormous financial commitments by virtue of their large populations.

And Iran and Iraq have the added burden of paying for the Gulf war. Iran appears desperate for cash and has been giving customers discounts on official prices. The Iranian parliament even passed a bill last week allowing the sale of antiques and historic objects to help meet its financial requirements.

Kuwait's production is sliding enough to give it trouble keeping its other industries going. Kuwait needs the natural gas associated with oil production to run the industries built with the oil wealth.

Saudi Arabia, the United Arab Emirates, and Qatar could be in the same boat with Kuwait if production has to be slowed much more, Mr. Mannock says.

OPEC's sales fell from the 1979 peak of 31.2 million barrels a day to 20.5 million in 1981, OPEC admits. A combination of factors has caused this decline. Spiraling oil prices scared the West into conservation. Mexico, Britain, and the Soviet Union have come into their own as big-time producers, and the world has gone through recession. These forces have conspired to convince OPEC to accept producing under 18.5 million barrels per day, industry analysts say.

The question that is going to prompt the moaning and flailing at the March 19 OPEC meeting is which countries are going to swallow how much of the production cuts.

Saudi Arabia has already announced it will drop its production ceiling by 1 million barrels. That announcement, however, is not at all as generous as it sounds, industry sources say, since the Saudis have been churning out only about 7 million barrels recently and lowering the ceiling is meaningless.

That means OPEC is back to square one in Vienna with a market surplus of 3 to 4 million barrels. And many are looking to the Saudis to soak up the bulk of that glut, analysts say.

Saudi Oil Minister Sheikh Ahmed Zaki Yamani says the kingdom could turn back the taps to 6.2 million barrels a day and still meet its financial commitments. But analysts here say Saudi Arabia is out to prove a point with its OPEC colleagues. ''If the American economy goes bust, they (OPEC) lose, too,'' because it affects demand for oil and the value of the dollar OPEC receives for its crude, Mannock says.

Sheikh Yamani is genuinely trying to develop a stable market for oil that won't give it a bad name as a commodity, Mannock says. The way he is doing this is by making OPEC suffer the consequences of whizzing prices up and down regardless of the market, according to industry sources.

You've read  of  free articles. Subscribe to continue.
QR Code to Saudi Arabia hopes to douse OPEC fire
Read this article in
QR Code to Subscription page
Start your subscription today